[Mr Speaker in the Chair]

Paul Blomfield: I beg to move, That the House sit in private.

Question put forthwith (Standing Order No. 163).
	The House divided:
	Ayes 3, Noes 45.

Question accordingly negatived.

High Cost Credit Bill

Second Reading

Paul Blomfield: I beg to move, That the Bill be now read a Second time.

Philip Davies: On a point of order, Mr Speaker. Is it in order for the person who proposes that the House sit in private neither to vote for that nor to be a Teller for that side during a vote?

Mr Speaker: The answer to the hon. Gentleman’s point of order is that nothing disorderly has occurred.

Jacob Rees-Mogg: Further to that point of order, Mr Speaker. It was noticeable that the shouts for Aye were very loud and the numbers voting in favour were quite small. Am I right in thinking that the vote ought to go with the voice, as recommended by “Erskine May”?

Mr Speaker: The hon. Gentleman is absolutely correct on that point, which is also not incompatible or inconsistent with my answer to the earlier point of order. The hon. Gentleman’s reference to “shouts” is correct: vote should follow voice. That is the well-established principle enunciated by “Erskine May”, which I exhort colleagues to follow.

Paul Blomfield: I thank Members on both sides of the House for their encouragement and advice. The supporters of the Bill, with four Labour colleagues, five Conservatives and two Liberal Democrats, almost perfectly reflect the composition of the House. The Bill has the support of many other Members, some of whom are here today and many more who cannot be here. That sends two important messages. First, regardless of how far the Bill progresses, Members’ desire to see statutory regulation of payday lending will not go away. Secondly, there is a growing consensus—not only across party, but beyond this place—on what the key components of the regulation should be.
	In preparing the Bill, I have drawn on the advice of Citizens Advice, the debt charity StepChange, the Centre for Responsible Credit, Which? and local debt advisers in my constituency. I am grateful for all their support. I have consulted Members from both sides of the House who are involved in the all-party groups on debt and personal financial, on financial education and on credit unions. I hope that the Minister will agree to meet those of us who have been involved in that process as we take it forward. The Bill reflects the common ground of all those groups and offers a consensus on how we should deal in an holistic way with the problems of payday lending. It recognises the important role that the Financial Conduct Authority has to play from April 2014. It deliberately does not seek to tie its hands with over-prescriptive detail, but aims to provide a positive direction of travel to the FCA on the key issues. I hope that that direction of travel is consistent with Government thinking.
	I am sure that hon. Members will wish to make many positive points and suggestions, so it is important for the Bill to progress into Committee where they can be considered in more detail. I am sure I speak for all supporters of the Bill when I say that I am open to that debate and the consideration of any amendments that are tabled. Other Members wish to contribute, so I will briefly set the context for the Bill and summarise its main proposals.
	We all know that payday moneylenders are making millions from loans aimed at some of the most vulnerable. They target the poor and make them poorer, pushing them into unaffordable and spiralling debt with exorbitant charges. It is not the intention of the Bill to close down payday lenders, because, sadly, there are few alternatives for many people. However, many of the practices our constituents have experienced are truly appalling. It is those practices that the Bill seeks to stop. We seek to learn from countries where payday lenders have been longer established—in particular the United States, the land of free enterprise—and where effective regulation is the norm.

Philip Davies: The hon. Gentleman talks about exorbitant rates of interest. These loans tend to be of quite small amounts—a few hundred pounds—and for a very short period of time. How much does he think it is reasonable to charge in interest on a loan of £150 over two weeks?

Paul Blomfield: One of the points I made a moment ago was that it would be inappropriate for us to be over-prescriptive. It is right for the FCA to make evidence-based decisions on details of that sort.

Philip Davies: The point remains. If the hon. Gentleman believes that the amounts being charged at the moment are too high, he must have an idea in his own mind of a figure that would not be too high. I just wondered whether he could tell us how much interest on a typical £150 loan over two weeks he thinks would be sufficient to prevent him from introducing the Bill.

Paul Blomfield: I think that most hon. Members would recognise that the annual percentage rate—I will come on to APR later—that Wonga charges, which has just gone up to approximately 5,500%, is entirely inappropriate.

Lyn Brown: Is it not a fact that loans are rarely £150 over a two-week period? The people accessing loans at high interest rates will have already been turned down elsewhere for credit with lower interest rates. A typical loan for Wonga et al is not £150 for just two weeks; the problem is that they roll over and over.

Paul Blomfield: My hon. Friend makes an important point, and I intend to come on to the issue of rollovers later.

Kevan Jones: Canada has a Conservative Government at the moment. It is interesting that in this country a £300 loan, whether in store or online, has an APR of 74% and 70%, whereas in Ontario it is capped at 7%.

Paul Blomfield: It is indeed. If we look across the United States and some other European countries where regulation is the norm, we see a variety of approaches to capping interest rates and capping the total cost of credit. That is also an issue to which I will return.

Barbara Keeley: Is not the key issue affordability? I recently heard from a constituent who had to pay back £160 after borrowing £100 for a week. She could not afford the £100, and she certainly could not afford the £160.

Paul Blomfield: My hon. Friend makes an important point. Affordability is indeed at the centre of the Bill, and is an issue to which I will also return.

Ian Paisley Jnr: The average payday loan in Northern Ireland is about £270 over 14 days, on which I think approximately 55% interest is charged. The people who take out these loans are the most vulnerable in society and cannot afford to repay them. I welcome the Bill. There should be more regulation for these products.

Paul Blomfield: I thank the hon. Gentleman for his contribution. That is precisely the point that the Office of Fair Trading made recently. The suggestion is that the ideal customer for many companies is one who can afford to pay back the interest, but not the original loan. The debt is then rolled over and over. There is limited outlay for the company, which turns into a significant profit.
	If I could make some progress, I want to address how the sector has grown in the UK. Back in 2004, it was worth only £100 million. By 2009, that had increased to £900 million and it is now estimated to be more than £2.2 billion. Between 7.4 million and 8.2 million new loans are estimated to have been taken out in 2011-12, causing serious debt problems across the UK. According to the OFT, approximately 2.7 million payday loans were given to people who could not afford to pay back on time, confirming many of the points that have been made. They make up a staggering one third of the total number.
	The number of people needing debt support has exploded in the past year. The debt charity StepChange this week reported that during the first six months of 2013 it was contacted by 30,762 people—almost the same number as for the whole of 2012. The increase in average individual debt from payday loans has risen from £400 to £1,665 since 2011.
	A series of damning reports in May underlined the urgent need for action. A survey by Citizens Advice found that payday lenders had broken 12 of their own 14 promises to reform the industry. Which? called for regulation to redress what it described as
	“the imbalance of power between lenders and borrowers”
	in a report that highlighted
	“sky high fees and irresponsible lending practices”.
	The Public Accounts Committee strongly criticised the OFT for failing to stop lenders targeting vulnerable people, highlighting its failure to hand out a single fine to any of the 72,000 firms in the market, and for only rarely revoking companies’ licences.

Gareth Thomas: I commend my hon. Friend on how he is introducing the Bill. Does he share my view that a priority for the Government should be the creation of more alternatives
	to payday lenders, particularly through measures to accelerate the expansion of the credit union sector in the UK?

Paul Blomfield: I very much agree with my hon. Friend. In my opening remarks, I mentioned that desperate people turned to payday lending because there were no alternatives; the need to develop those alternatives is a pressing issue, and one that I hope the Government will address. I did not think it could be considered within the scope of the Bill, but clearly it is very important. A number of credit unions are beginning to develop more imaginative products, while other financial institutions are also addressing the issue.

Richard Burden: Does my hon. Friend agree that the Government could encourage the Post Office to get much more involved with credit unions by providing them with counter facilities and so on? Is he also aware that our former right hon. Friend, John Battle, is, at this moment, actively involved in doing just that in Leeds?

Paul Blomfield: My hon. Friend makes an important point, and one that has been discussed previously in the House. The role of post offices could be significant; and, yes, I am aware of John’s work in Leeds, which it might be useful to share more widely with Members; it is a very positive initiative.

Mark Durkan: Does the hon. Gentleman recognise the apparent contradiction on the part of some people who support legislation capping credit union interest—currently at 2% per month, although the Government propose to raise it to 3%—yet oppose any cap on the sort of predatory creditors his Bill tries to target?

Paul Blomfield: The hon. Gentleman makes a powerful point, and one that rankles with credit unions as they try to develop their support for people.
	The first set of measures in the Bill relates to advertising and information. Citizens Advice recently published results from its payday loan survey on implementation of the sector’s own good practice customer charter. It found that 21% of respondents were not clear about total repayment costs. The Bill would therefore require lenders to display interest payable in cash terms, so that people knew and could compare the cost of borrowing in a consistent way to be determined by the FCA. The Bill would also require that lenders state all fees and charges—crucially including default charges—and the circumstances in which those charges would be invoked on loan applications, so that people were clear about what they were committing to.
	Many organisations are tackling the promotion of payday lenders in their own way. I am delighted that on Wednesday the university of Sheffield announced that it was banning payday advertising from its campus, which the National Union of Students has called for nationally. Many football clubs have also taken a strong stand. I congratulate Millwall, Bolton Wanderers and, although all my life my heart has been on the other side of the city, Sheffield Wednesday on the stands that they have taken.

Ian Paisley Jnr: Resign!

Paul Blomfield: Some people would call for that.
	My Bill does not go that far, but it would require that all advertising carries a health warning about the nature of these loans and signposts people to free and impartial debt advice, as an option before they proceed.
	The OFT highlighted the problem of
	“a pattern of advertising that emphasised speed and easy access to cash, at the expense of giving customers balanced information about the cost of lending, the risks if things go wrong and the consequences of non-payment.”
	The Bill, therefore, would require that advertising complies with rules set and regulated by the FCA, which would be absolutely in line with Government thinking; the Department for Business, Innovation and Skills has already commissioned a study on advertising of payday loans, and the FCA is keen to look into it. The Bill does not prescribe the rules, but it states that there must be rules. The advertising code for gambling illustrates the sort of approach that might be adopted as well as a possible restriction on the sponsorship of certain activities.
	The Advertising Standards Authority recently banned three text messages promoting loans to young people out clubbing. The Bill therefore would require texts and phone calls not to be used to promote high-cost credit. It would also require lenders properly to explain liability to guarantors, where loans asked for them, and the signing of consent forms; credit brokers to provide borrowers with the names and details of lenders; and lenders to disclose details of lead generators to the FCA.
	Following on from the point made by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley), the second set of issues covered by the Bill relate to affordability. Although most lenders claim to assess affordability, the OFT’s recent report said that
	“the vast majority of those we inspected were unable to provide us with satisfactory proof that they applied such assessments.”
	Citizens Advice found that only 36% of respondents were asked questions to check whether they could afford to pay back the loan. The Bill therefore would require lenders to assess the affordability of loans and introduce an affordability ceiling to be determined by the FCA, either based on credit repayment as a proportion of monthly income or on the total value of loans.
	The Bill would also provide for the FCA to set a cap on default charges and the circumstances in which those charges could be applied. It would require lenders to share information with credit reference agencies as an interim measure, pending the establishment of a central real-time database requiring lenders to log details of loans and to seek information to ensure that they do not lend above the affordability ceiling determined by the FCA. It would also provide for a levy on the sector to run such a database, which would be a powerful tool to aid regulation and support evidence-based decision making.
	As hon. Members have mentioned, we need to consider a cap on the total cost of credit, which Parliament has empowered the FCA to impose. The Bill does not seek a cap, but it would require the FCA to report on how it intended to exercise that power and to keep the issue under review. As mentioned, central to the concerns of spiralling debt is the issue of loans being rolled over. The OFT found that 28% of loans were rolled over at least once and that they accounted for 50% of lenders’
	revenues. Furthermore, 19% of revenue comes from the 5% of loans rolled over four times or more; roll-overs are profitable business. As I mentioned earlier, the OFT said:
	“Our evidence suggests that encouraging roll-overs is a deliberate commercial strategy of some firms”.

Gregg McClymont: Is this roll-over issue not an example of predatory capitalism of the very worst kind?

Paul Blomfield: It is indeed, and the Bill seeks to promote responsible capitalism of a better kind. It would also require the Financial Conduct Authority to determine a limit on roll-overs. We are not specifying at this stage what that limit should be, but looking for a solid, evidence-based decision.
	The Bill also includes measures on debt collection, particularly with regard to continuous payment authorities. One case brought to me in Sheffield was of a single jobseeker’s allowance claimant who had obtained while working a payday loan from The Money Shop. Once out of work, he was unable to cover the £250 due from his bank account, but his bank told him that he could not stop the payment being made, which had deeply difficult consequences for him. Another case shared with me was of someone whose account was drained by a payday lender using a CPA, leaving him with no money for rent and facing eviction.
	These are common problems, as other Members will be aware, so the Bill requires lenders to give customer three days’ notice of every CPA withdrawal and to ensure that customers are clear on their right to cancel CPAs. The Bill also has measures to ensure that lenders are not allowed to make charges for the administration of CPAs—a practice used by some—and includes a more general provision to allow the FCA to determine the circumstances under which CPAs should not be used, which might include cases where that would lead to essential bills going unpaid, which is an approach adopted in other countries.
	As has been said, those who turn to payday lenders are often desperate. Before getting deeper into debt, they would benefit from advice, so the Bill seeks to promote debt support more effectively. It includes a number of triggers that would require lenders to signpost customers to free and impartial debt advice and, where a debt adviser is engaged, to require lenders to freeze charges and put in place an agreed payment plan. Some credit unions—including Birmingham’s Citysave credit union, which has launched a product to help people to pay off their payday loan debts over a 12-month period with a credit union loan—have found some payday lenders to be obstructive. The Bill therefore includes a provision for lenders to accept offers from third parties, specified by the FCA, to settle outstanding debts. The Bill also provides for the FCA to have the power to establish a new levy to support debt advice, about which I know the hon. Member for Worcester (Mr Walker) will speak in more detail. Finally, the Bill requires the FCA to determine enforcement powers to be used in the case of breaches of the Bill.
	I would like to conclude—and to give other Members the opportunity to contribute to the debate—with an example from Sheffield of someone caught by the problems that the Bill aims to tackle.

Christopher Chope: Before the hon. Gentleman gives his last example, can he say what he thinks the impact of his Bill would be on the number of people seeking payday loans if it were to become law?

Paul Blomfield: As I said at the outset, the Bill does not seek to close down the sector, but I hope it would reduce the number of payday loans by signposting people towards debt advice, thereby opening them up to the kind of support that might lead them in other directions and prevent them from being caught in the spiral of debt. More importantly—others have made this point—by tackling roll-overs and other ways in which the industry makes unreasonable profits from unacceptable practices, the Bill will prevent those who turn to payday loans from being ripped off in the way that, frankly, they are at the moment.

Philip Davies: Following on from that, if the hon. Gentleman’s Bill came into law, what effect does he think it would have on the number of people who borrow from those who employ more “agricultural” means of recovering the money?

Paul Blomfield: That is an important point. It is one I have looked at in relation to the United States, where unregulated markets have been regulated. Where such regulation is introduced in the measured way that the Bill seeks, there is no evidence that people turn to the sort of illegal loan sharks about whom we should be very concerned.

Penny Mordaunt: I congratulate the hon. Gentleman on introducing the Bill and other Members who have worked on the issue, including my hon. Friend the Member for East Hampshire (Damian Hinds). Does the hon. Gentleman agree that often people are in such dire straits from taking out payday loans at massive credit rates that they turn to loan sharks and other disreputable creditors in order to pay back the first loan?

Paul Blomfield: The hon. Lady makes an important point and she is absolutely right.
	Let me conclude by giving an example from Sheffield of a single parent, not currently working but supporting three young children. She used various payday loans from different companies to pay household bills and found herself trapped in a spiral of debt. The Money Shop, for example, gave her three roll-overs at £30 a time. It used a CPA to withdraw money needed for essential household bills from her account and she subsequently fell behind with her rent. When she approached the companies, they were very unsympathetic. The Cheque Centre was at one point calling her five to seven times a day. She feels, as many Members of this House do, that payday loan companies prey on the most vulnerable, offering credit to those who have no realistic prospect of paying the money back. This House has a responsibility to ensure that that does not happen. That is why I commend the Bill to the House.

Damian Hinds: It is a great honour and a privilege to follow the hon. Member for Sheffield Central (Paul Blomfield). I congratulate him on bringing the Bill to the Floor of the House and on securing the prized second position in the ballot. Of course, we on the Conservative Benches are delighted that our hon. Friend the Member for Stockton South (James Wharton) got the gold medal position, but the hon. Gentleman has achieved a very worthwhile and useful silver.
	The Bill is also timely, as we are in a period of rapid change in high-cost credit. We have had the OFT review—operators are losing their licences for the first time—and the Competition Commission referral. We have the new FCA regime, whereby, for the first time, it can impose a general cap, should it decide to do so.
	The Bill is timely and current, but the issues are not new; they have just changed in their shape and manifestation.
	My interest in high-cost credit started in 2003, when I did a research project for the Bow Group that looked at various issues affecting inner-city areas, one of which was debt. I ended up doing that research only because nobody else would do the bit on debt, but I discovered that it is a hugely complex, interesting and challenging area. Among the recommendations we made—Members should bear it in mind that this was back in 2003 and we published in 2004—were a complete overhaul of information and disclosure on high-cost credit, including replacing APR as the headline measure with a cash figure for how much people would have to pay back. We advocated “new model” credit unions, with a save-as-you-pay-back product, a slightly eased cap on the APR they could charge and a social ISA, as a way of bringing more capitalisation into the credit union sector from better-off consumers. Some of those things have now been done, by the previous Government and this Government. We have an opportunity to debate some of the others today, thanks to this Bill, and I hope that others may yet fight another day.
	That period—2003 to 2004—was about two thirds of the way through what Which? in its recent report calls the credit feast of 1997 to 2007, when borrowing increased from £77 billion to £190 billion. I make that point not as a party political point but to negate a different party political point that is sometimes propagated—that the growth of payday lending, high-cost credit and sub-prime is somehow the result of a Conservative-Liberal Democrat Government. It is not; it is just that the different types of product on the market tend to evolve and change over time.
	There is a great deal in the Bill. I suppose it is unlikely that anybody here would agree with every single part of it, but I think that every single part of it is worthy of consideration. I suspect that all or the vast majority of us would agree on some aspects—for example, that loans should be made only to people who can afford to pay them back, and that lending companies should not pretend to solve problems that they cannot solve, especially when they might well be creating newer and greater problems.

Christopher Chope: My hon. Friend puts the case in the context of the lender, but is it not also incumbent on the borrower not to borrow money that he or she cannot repay?

Damian Hinds: Of course it is; no one would deny that—well, perhaps some would, but I certainly would not. There is a big issue about individual responsibility, but this market is a complex one, and it can be difficult for people to find their way around the jungle of credit that is available. People who take these loans are often in very vulnerable circumstances, and I am afraid that the purchase decision—people can blame whoever they like—often ends up being made not on the product that is “right for me”, but the one that the person has just seen on the television or the person who came to the door.

Kevan Jones: Part of this Bill tackles the important issue of advertising, but does the hon. Gentleman agree that what is also needed, especially in schools and for young people, is education about APR and borrowing in general?

Damian Hinds: I agree, and I shall come on to the point, albeit briefly, later.
	The second issue on which I think the vast majority of us could agree is that the loan should get paid down within a reasonable period and not be left hanging over people who never get the loan reduced in size—and it gets even bigger for some.

Philip Davies: My hon. Friend said he was concerned about people taking out these loans because they had just seen an advert, and my hon. Friend the Member for Christchurch (Mr Chope) suggested that some people take out loans irresponsibly. Research by the university of Bristol personal finance research centre seems to suggest something different—that there were logical reasons why people took out these loans: convenience, having no or limited access to other sources of credit, and the customer service and reputation of the firms concerned.

Damian Hinds: And there are multiple other reasons why people take out credit products, many of which are just as rational. I shall come on to some of them later in my remarks, but there is ample evidence to show that many people taking out loans—and the same applies when they access a debt management plan—choose something that is inappropriate. Even where comparative, side-by-side, costings are available—to those of us who studied economics and believe in consumer sovereignty and rationality, this is difficult stuff to get our heads round—consumers often take the more expensive option.

Mark Durkan: Is the hon. Gentleman’s answer to the point from his hon. Friend the Member for Shipley (Philip Davies) that the very fact that these products are advertised in a mainstream way as being so convenient is one of the things that gives them the air of reputability, which encourages people to opt for them as a standard and acceptable form of borrowing?

Damian Hinds: I am grateful to the hon. Gentleman. That may well be part of it. There is a range of operators in this market, stretching from the big and well known
	with very large ad spends—we can call them “reputable brands” if we like—through to quite iffy-looking companies at the other end of the scale. As in most markets, there is a range.
	All these points—I am grateful to hon. Members of all parties for making them—bring me to the third point on which I think we should all be able to agree. Wherever people are on the political scale—whether they are a Milton Friedmanite free market economist or a socialist—they should agree that people should not have to go to excessive lengths to know that they are not being ripped off. There is, of course, a reasonable amount of due diligence that has to be applied when people make a purchase, take a loan or whatever, but they should not have to run around the block seven times to know that what they are taking out is reasonable value.
	Those are the three things on which I hope we can broadly agree, and the debate largely revolves around how we achieve them. It is not always quite as straightforward as it appears. On occasion in this House and elsewhere, relatively simple solutions have been proposed that purport to deal with complex market issues in one big initiative. I suggest that that is rarely an adequate answer, as it is rather more complicated.
	There are a number of rules of the road in the credit markets, and they have come into sharper focus for me as I have looked into this subject over the last few years. The first is that there are always unintended consequences—except when there are no consequences at all—of what regulatory authorities try to do. The second is that markets cannot be beaten unless something better is provided. The third is that where demand creates its own supply, supply creates its own demand. Let me explain in a little more detail what I mean in each of those cases.
	On the unintended consequences, it is a beguiling and attractive prospect to say, “Let us just cap the amount of interest that lenders can charge on their loan products so that people will pay less and household budgets and benefits will go further.” The problem with a blunt and general APR cap is that companies find new products that slip outside the definition being regulated and new ways of making money that do not count as part of APR. To the extent that this cap, or something like it, is effective, its major impact is market exclusion, which inevitably means the most vulnerable and the poorest customers are those most likely to fall into the hands of illegal loan sharks and the sorts of people whose idea of a late payment penalty is a cigarette burn to the forearm.
	When I say that there are sometimes no consequences at all, it can again be beguiling to think that we have done something clever, come up with an initiative, empowered consumers and so forth, but it turns out that no impact whatever was made. It is very easy for disclosures, warnings, signposting and so on to just become part of the wallpaper of life—like the bit at the bottom of the billboard chart that says “Your home may be at risk if you do not keep up your payments on a mortgage or other loan secured on it”. In the case of this market, hon. Members may recall from the previous Competition Commission inquiry that there was, for example, a lenders-compared website, which was meant to help consumers who might be home credit borrowers to compare the price of home credit providers against
	credit unions and so forth. The problem, of course, is that nobody uses it. The regulatory authorities feel happy because they have provided something, but what they have provided actually does no good at all.

Robin Walker: My hon. Friend is making an excellent speech. Does he agree that part of the problem is the fact that one of the figures or statistics that people often ignore is that for APR? Does he share my concern that, in a poll of students, significant numbers thought that the higher the APR the better, showing how poorly this measure is understood?

Damian Hinds: My hon. Friend raises an important and telling point. It is, as he says, a problem affecting students, but I am afraid that it exists for many older folks as well. It highlights the fact that a cash number might be a more appropriate headline figure on which to explain the costs.
	My second rule is that if the market is providing something that people want and it seems to fulfil a need, it cannot be get rid of unless something better is provided. Credit is a fact of modern life. During the year, people have ups and downs in their expenditures patterns—around Christmas, birthdays and back to school, as well as when unexpected things happen such as a car or a relationship breaking down. Credit is one of the means that everybody uses—or almost everybody, whatever their income level—to help smooth out those ups and downs. It can be entirely rational—the point raised by my hon. Friend the Member for Shipley (Philip Davies)—even to take out a payday loan at a 2,000% APR if in so doing someone avoids unauthorised overdraft charges by the bank, which might cost even more. When the market provides something that has a use, it will not be got rid of until something better is provided.
	My third point is that although, as I said, the market will provide and supply will follow demand, it is also true that demand will follow supply—on that at least, Galbraith was right. Payday lending in the UK in recent years has not grown because it has suddenly become more difficult to get from one pay day to the next. People have always struggled to get from one to the next and to pay unauthorised overdraft charges to tide them over for a short period. The difference is the availability of payday lending—partly, Members may note, displaced from the United States, from where a number of operators have come as the regulatory environment in the US has become more difficult. That suggests that there is some efficacy in regulatory restrictions.
	All of that tells us that individual simple and grand solutions will probably not create the whole answer. We need an integrated approach, and, as the hon. Member for North Durham (Mr Jones) mentioned, we need financial education. That is one of three parts that have to constitute an integrated approach. The others are sensible regulation and disclosure and ensuring that there are alternatives to high-cost credit and to operators that we would rather people did not have to use.
	To be fair to the Government, there is quite a strong story to tell on each of those points about action that has been taken and is being taken. Financial education is going to be in the national curriculum, and there will be a strengthening of mathematics in schools. On sensible regulation and disclosure, we have the new regime with
	the Financial Conduct Authority, which has the potential to be tougher and more effective than regimes hitherto. Even at the end of the old regime, we are now seeing a sharper and tougher approach from the Office of Fair Trading.
	Finally, on alternatives, I am proud of the Government’s support for the credit union sector. We could say the same of the previous Government’s support, although this Government have gone further and are seeking to help the credit unions—those in Great Britain, I should say for the benefit of the hon. Member for Foyle (Mark Durkan)—be self-sustaining and a healthy sector, just as credit unions in Northern Ireland are, and at economic scale. There is also possibly more that could be done in exhorting the mainstream banks to live up to what they might do to ensure further financial inclusion and affordable credit.
	Are the Government doing enough? I think it remains to be seen. To some extent they may be, and the new FCA regime could produce quite a dramatic change over time, with credit unions becoming bigger, offering an improved product range and so on. That will really make a difference, and with the lifting of the cap from 2% to 3% per calendar month, we will start to get into a zone in which short-term loans can take on parts of the payday lending market.
	Big issues remain, however, and the hon. Member for Sheffield Central mentioned some of them. At the top of the list, of course, is the massive and visible growth in payday lending. One thing that has really made a difference to the public policy debate is that now that high-cost credit is on the side of buses a lot more people are paying attention to it than when it was only on daytime telly or on the back of tabloid newspapers. There are also issues to do with credit brokers and the Amigo model, which is a new model of credit whereby people get their mates to underwrite their loan, and then it turns out, lo and behold, to the surprise of that mate, that he or she gets stiffed for having to pay the loan later. We must also consider the behaviour of certain debt management companies, marketing practices and so on.
	Through it all, we should not forget old-school credit. I have mentioned all the new flashy new things that are clearly visible on the radar of public policy makers and commentators, but home credit is an enormous sector that is largely invisible to most of us, because most of the time it is a door to door activity on streets and estates, using an agency network and without advertising. The leading operator of home credit claims to have one in 20 UK households as regular weekly customers. It is an enormous business.
	I turn to specific aspects of the Bill. I will comment on them in the sequence of the customer journey, starting with advertising. This is tricky for me to say, as I believe in free markets—I am a Conservative MP and was a marketer before I came to the House—but at some point we have to face up to the fact that not only sharp practice, such as dodgy or unrealistic advertising, but the volume of advertising in the credit market makes a difference. The sheer ubiquity of messages about the ease of access to credit and the problems it will solve has an impact.
	I am not about to advocate some sort of volume restriction on advertising, but we must have that point in the back of our mind. I understand that the Government
	have commissioned some research on the effect of payday loan advertising on consumers, and that we will hear back on it in the autumn, to which I look forward. Without trying to restrict the total number of ads for credit, I think there are some things that everybody can agree are blatantly bad and should be stopped. One example, to which I think the hon. Gentleman alluded, was the £1,000 night out text that First Payday Loans sent to people. It purported to be from a friend and said, “I’m still out on the town and I just got £850 or £1,000, and you can too.” That is clearly bad practice in advertising.
	I saw an advert on Sky News the other day for an instalment loan, not a payday loan. It said, “Quote this voucher code for 20% off”, and then in small letters on the screen, it said “20% off your first repayment.” There are 12 repayments, with 20% off the first one, so it is hardly a bargain. We need better enforcement on advertising, and the new regime can bring that.
	More generally, as the OFT has said, there is too much emphasis on the speed and ease of getting credit. The terms of competition are, “We will do it faster than the other lot.” It is about fewer checks, less waiting time and so on.

Penny Mordaunt: Does the hon. Gentleman agree that for an enormous number of people who are going for such loans, it is extremely attractive not to have any face-to-face time? Often, they are intimidated by having conversations with a bank manager and so forth, and some of them are deeply embarrassed about the situation in which they find themselves. Being able to go online and spend 15 minutes getting a loan without any advice or any real time to think about it is an extremely attractive option.

Damian Hinds: My hon. Friend is entirely correct. It is not necessarily even about face-to-face time; even not having to provide a physical signature makes a difference. We cannot logically explain why that is so—it just is. Each hurdle makes people reflect further on what they are doing, and as things become quicker online, that creates an added danger.
	Some of the advertising and marketing styles of payday loan companies in particular, such as using cutesy cartoon characters, are to my mind not really appropriate to people possibly getting themselves into financial trouble.

Jacob Rees-Mogg: I am very much enjoying my hon. Friend’s speech. It puzzles me that payday lenders seem to be exempt from the normal rules of “know your client” and money laundering. They prevent any investment house from receiving money, and it seems strange that companies can lend money without being obliged to follow them.

Damian Hinds: As ever, my hon. Friend makes a perceptive point.
	I do not think that health warnings on advertising will solve every problem, but I do believe that there is a role for them. If we have health warnings on all sorts of other things now, it is reasonable that we have them on debt advertising.
	We must also consider the representation of costs. APR is not a particularly helpful measure in many ways—once it goes past the first 1,000%, people start to think, “What difference does that make?” There is a
	natural argument for saying that there should be a cash cost comparison instead. However, there is no perfect solution. The formula that Which? proposes of pounds per 30 days seems to deal with the immediate issue, which is the growth of payday loans. It does not necessarily help with the comparability of all products, however, and with any cash comparison—the amount-to-pay-back figure—there is still the issue of how to deal with behavioural charges, which are an additional way of making money out of the customer. Companies can in theory charge a relatively low headline payback rate in the knowledge that they will make more money from missed payments and various other behavioural penalties. We may in the end decide that a cash comparison is useful, but we will still need the representative APR figure, and we will also need to have a proper analysis and debate about which behavioural and other charges should be reflected within that.
	On agencies and intermediaries, I support the Bill’s provisions on credit brokers, underwriters and guarantors, and the Amigo model, but there is something else we need to be aware of: as the online market develops even further, there is a tendency in every sector—I saw this in my old sector of hotels and travel—for intermediaries to come in, particularly on paid search, and intermediate, and there is a natural inflationary pressure in that process, which in the end only ever gets passed on to the consumers. Whereas the internet is supposed to make things cheaper for consumers, and comparisons easier and markets freer, it actually tends to concentrate power with other people and add other costs, a lot of which end up going to search engine providers.
	Affordability and cost limits is another important issue. Two types of limit can be applied. One is a limit on the cost of the loan—on how much companies can charge to anybody. The other is a limit on affordability, or how much credit can be extended to an individual given their circumstances. Both of them are very complex, which is implicitly acknowledged by the fact that the hon. Member for Sheffield Central says in his Bill that the FCA would have to decide exactly how these things work.
	There are big arguments against having a cost cap, because of all the unintended consequences that I have mentioned, but if there is to be a cost cap, it ought to reflect the actual cost structure of extending a loan. In principle there are three elements of cost in extending a loan. The first is the initiation cost, including customer acquisition and credit checks. The second is the actual cost of capital. The third is the risk element, which will vary by customer-type.
	If we recognise that and want to reflect it in a limit on the amount of interest that can be charged, we should end up having two elements to the cost cap. One of them is to cover the initiation of the loan, and the second is to cover the cost of capital and risk factor. The figure here would be something like a cap of 15% of the capital as a one-off, plus 30% as an annual interest rate. Sub-prime and high-cost credit providers that offer a range of loans seem to follow that sort of formula.

Philip Davies: My hon. Friend talked about assessing affordability and I just wondered whether he had any views about what information should be provided to the
	lender in terms of bank statements, proof of income and so forth. If this was just done on a self-verification basis, people could say anything they wanted to make sure they got the loan.

Damian Hinds: As ever, my hon. Friend tees me up nicely for my next point, which is about affordability. This is different from the issue of an overall cost cap. People need a bank account to get a payday loan, and payday lenders will typically require proof that they have a pay day on which a regular amount of income comes in. The Bill proposes a single real-time database. For myself, I think that is a step too far. This would be a database of every loan that everybody in the country has, and to be effective it would need to cover not only payday loans, but credit card debt, mortgage debt, car debt and all sorts of other debt. There are massive worries in that, relating to privacy, civil liberties, the concentration of data and, of course, what happens when, inevitably at some point, it goes wrong. I do think we need to look at serious reform of the existing credit reference agency system, however. It does not seem to work as it should when people who are overstretched and who have had eight, nine or 10 lines of credit extended to them go to debt advice agencies.
	Another issue is making sure the loan actually gets paid down over time. There is a big fashion for restricting roll-over. We need to be careful about that, however, because it deals with the immediate issue we happen to face in 2013. I remind Members that 10 years ago roll-over was something we understood only in the context of the national lottery and 20 years ago we understood it only in the context of “10 in the bed and the little one said”. In terms of loan products, it is a new thing, therefore, and I would rather we instead had a general duty to make sure the loan gets paid down over time. That should apply to instalment credit and revolving credit as well as to payday loans. A product that is advertised as a 30-day loan should, therefore, be paid down fully by 60 or 90 days, but the payback should start before that 60 or 90 day point is reached.

Christopher Chope: Will my hon. Friend give way?

Damian Hinds: I had better not, as I am about to conclude.
	On debt advice referral, I agree with the hon. Member for Sheffield Central that signposting at points of risk is vital, but there are even simpler things we could do, such as making sure that when people are actively trying to signpost themselves to debt advice, they find it more easily. I am thinking in particular about internet search engines, where keywords can be purchased by commercial providers when we might prefer the search went immediately to not-for-profit organisations.
	Finally, I want to talk very briefly about three issues that are not covered by the Bill, but which are closely related to it. I mentioned our not being able to beat something in the market until we come up with something better. The first issue relates to mainstream banks and the fact that part of the reason why payday loans are popular is because of the behavioural charges people incur at mainstream banks and the bounce charges. We need to work on that, and if possible remove the cause at source. There is no such thing as free banking; there is only banking which is paid for by different people in
	different ways at different times. There is cross-subsidy from people with more complex, perhaps even chaotic, banking affairs to people who have simpler banking affairs—or to put it another way, banks make money out of people going overdrawn accidentally and being charged for it.
	This is politically difficult, but people ought to cover the real economic cost of their current account. If that were the case, it would pave the way for a different type of bank account—a jam jar account, or budgeting account—which would make it much less likely that people would trip into debt.

Robin Walker: Will my hon. Friend give way?

Damian Hinds: I apologise, but I had better not.
	The second issue is alternatives and credit unions. I have already said I strongly support what the Government are doing, and with the 3%, rather than 2%, a month cap there is now the possibility of lending in the short-term market, but we also need to look at the costs credit unions face and make sure that in respect of loan initiation—particularly with credit checks and so on—it is possible for them to operate in that short-term market effectively.
	Thirdly, on savings, if everyone had a small cushion of resilience against the car breaking down or the little things in life that go wrong and push us over the edge, there would be less likelihood of credit being needed. [Interruption.] The hon. Member for North Durham (Mr Jones) is shaking his head, and I wonder if he is saying to himself—or to me—that that was a naive thing to say.

Kevan Jones: It is.

Damian Hinds: I am grateful to the hon. Gentleman for that, but it is not a naive thing to say because we end up spending more, not less, by borrowing. I am not saying this is easy, but I am saying it is better to help people to build up that cushion, if at all possible. That is one of the things credit unions do; it is what the credit union movement is founded on.

Kevan Jones: Will the hon. Gentleman give way?

Damian Hinds: I am afraid I cannot, because—[Interruption.] Go on then.

Kevan Jones: I agree with the hon. Gentleman’s point about credit unions, and I am actually a director of one. But the fact of the matter is that the people we are talking about are on low pay, intermittent pay or zero-hours contracts, which his party is in favour of, so they have no ability to save large sums. The Chancellor’s proposal on delaying the applications for jobseeker’s allowance for seven days will make it even worse for those people.

Damian Hinds: If the hon. Gentleman will forgive me, I must say that he makes political rather than helpful points on this subject. I did not say that these people had the facility to save large amounts of money. As a director of a credit union, he will know that the whole credit union movement is based, initially, on helping people to save. Many credit unions will have a “save as you pay back” process, whereby even where someone borrows from them they will find that at the
	conclusion of that loan they have a small savings pot, which will stand them in better stead for the future. If we move more towards budgeting-type banking—the so-called jam jar bank accounts—there will be the facility for small amounts of money to go, through payroll deduction, into a savings account. That has exactly the same effect, but at a cheaper rate, in terms of smoothing out the ups and downs of cost that people incur through the year.
	In conclusion, I wish to congratulate, again, the hon. Member for Sheffield Central, who has done a great service in bringing all these issues to the House. We have a new regime and we have a lot going on from the Government, so we have to see how that beds down, but I am sure that today’s debate will push that forward.

Ann McKechin: It is a great pleasure to rise to support the Bill, and to commend my hon. Friend the Member for Sheffield Central (Paul Blomfield) for securing this Bill for debate and for the measured way in which he has sought cross-party support. I hope that the Government will use the opportunity of the Bill to allow us to take forward the sensible and measured approaches he has proposed.
	Let us be in no doubt that we are here today because the regulatory controls in this country are weak and are failing to protect the most vulnerable in our communities. That is why the growth in the number of distressed borrowers is going through the roof. Despite the many warnings that came when the payday lending sector started to expand—the hon. Member for East Hampshire (Damian Hinds) explained this in great depth—we have allowed a wild west gold rush to happen in the high-cost credit sector. It is no wonder that so many major US players have been so keen to invest tens of millions of pounds to achieve a significant market presence here. In 2010, five of the seven biggest payday loan companies in this country were controlled by a US company. Interestingly, some of those companies also operate in Florida, which now has one of the most tightly regulated high-cost credit sectors in the world. It has no roll-overs whatsoever, but according to figures that I have received this week from Veritec Solutions, which provides the regulatory system operated in Florida, there has been a substantial increase, year on year, in the high-cost credit sector in Florida. What it does not have, however, is a substantial proportion of highly distressed borrowers. That is why this Bill is important in putting forward the message about controlling the number of distressed borrowers.
	This week, the StepChange Debt Charity reported that more than 30,000 people have contacted it for help with payday loan problems in the first half of this year alone—that is a 54% increase on the figure for the previous six months and is almost the same as the total for the whole of 2012. The charity found that the average payday loan owed in my constituency was more than £1,500. So we are not just talking about £50 here or there; these debts are becoming a marked part of the lives of people in loan distress.

Kevan Jones: Does my hon. Friend also have lenders in her constituency who will lend as little as £10 to certain individuals, at exorbitant rates of interest?

Ann McKechin: I was interested to hear what the hon. Member for East Hampshire (Damian Hinds) said about the rate of interest, but it actually includes the risk of roll-over loans. So if someone does not take out a roll-over loan, they are actually paying more than the market should be charging them. I am very pleased that we have the inquiry by the Competition Commission, and I hope that that is one of the factors it will examine.

Damian Hinds: I think that the economics work the other way round. Lenders make a lot more money on the roll-over loan than on the previous loan, in general.

Ann McKechin: The hon. Gentleman is right, but the lenders build the risk into the interest rate they charge, so that rate is probably higher than it should be. If we controlled roll-overs, we could also control the amount of APR that the lenders then charge.
	The inquiry by the regulator found that companies were making up to 50% of their money from customers who extended or rolled over loans, or who incurred late payment charges. That suggests that this market is out of control. It said that borrowers using payday loans have
	“poor credit histories, limited access to other forms of credit and/or a pressing need to borrow”.
	The Government need to look at the role of our major banks and, in terms of the unsecured credit market, why so few options are available to many borrowers. This is about extending the market options, through not only credit unions, but our high street banks.
	Self-regulation, as in the US previously, has not worked. The Citizens Advice survey since the introduction of the good practice customer charter showed that payday lenders are regularly and systematically breaking their own promises; they are still not making adequate affordability checks or giving proper advice if debtors get into difficulties. We need a real-time recording system, paid for by the industry, not by the Government. Such systems already operate in many other international sectors and there is no reason why these self-same companies could not offer to install such a system in this country without delay.
	The watchdog has been criticised. The Public Accounts Committee found that it had been “ineffective” and “timid”, and that it has failed to identify risks of malpractice. I spoke recently to someone who has worked in the US high-cost credit sector and he was astonished at the regulator’s lack of concern over recent years. Frankly, this has been perceived as a peripheral problem affecting “little people” who could not cope with their weekly finances. But in the meantime, huge numbers of people have, since the financial crash, seen their household finances severely squeezed. The growth in food banks and in the number of people who are distressed is increasing week on week. At the end of February,
	outstanding consumer unsecured credit lending in this country stood at £158 billion.
	We have failed to invest enough in regulation. We have failed to control this sector properly. This Bill provides us with an opportunity to install proper regulation. I welcome the decision by the Government to move regulation to the Financial Conduct Authority, but that needs to happen sooner and it needs proper direction from Ministers. I am concerned that agencies such as Money Advice Service are still wasting time and money on useless adverts, one of which I watched last night, about mortgage advice—that sector is highly regulated and there is no sign of abuse in it—yet they are not actually tackling vulnerability. The Government cannot abdicate responsibility to a quango; they need to make it clear where those quangos’ priorities lie and that vulnerability has to be central to them.
	I hope that the Government will take the opportunity to participate actively in the Bill to make sure that we can start to crack the problem, which is affecting every community in this country.

Jo Swinson: I very much thank the hon. Member for Sheffield Central (Paul Blomfield) for introducing his Bill and giving the House the opportunity to discuss this matter. We have heard some excellent speeches from hon. Members on both sides of the House, and it is clear that this important issue affects people in every one of our constituencies. Although it is true that some people can take out a payday loan and have no problem with it, finding it a useful product, it is also true that many others have a very different experience indeed. We have heard some of the case studies; we heard about the experiences of individuals and the misery they have found themselves in as a result of a spiral of debt, much of which is not always helped by the payday loans and the behaviour of those in the industry.

Gareth Thomas: Can the Minister be clear with the House at the outset about whether she intends to encourage the Friday wolves on her Back Benches to talk out the Bill or whether she will support it and allow it to go to Committee?

Jo Swinson: I can certainly let the hon. Gentleman know that my intention is to make a speech of a reasonable length, and I am happy to take interventions and ensure that the House has the opportunity to question the Minister on these issues. I have to say that Friday is not my favourite day to be in the House because of some of the behaviour that is often on display.
	I shall certainly address the points raised by the hon. Member for Sheffield Central. I appreciate the work that he has—
	Proceedings interrupted (Standing Order No. 11(4)).

Tobacco Packaging

Diane Abbott: (Urgent Question): To ask the Secretary of State for Health if he will make a statement on the Government’s response to the consultation on standardised packaging of tobacco products.

Anna Soubry: The Government’s policy remains unchanged. The Government have today published a summary report on the consultation on the standardised packaging of tobacco products. The consultation was undertaken last year between April and August with the agreement of the devolved Administrations on a UK-wide basis. The summary report is available in the Library.
	The standardised packaging of tobacco refers to measures that may be taken to restrict or end the use of logos, colours, brand images or promotional information on packaging. Any brand or product names would be displayed in a standard colour and typeface. The consultation was intended to explore views on whether standardised tobacco packaging would reduce the appeal of tobacco products to consumers, increase the effectiveness of health warnings on the packaging of tobacco products, reduce the ability of tobacco packaging to mislead consumers about the harmful effects of smoking and have a positive effect on smoking-related attitude, beliefs, intentions and behaviours, particularly among children and young people. To inform responses to the consultation and subsequent policy making, the Department commissioned a systematic review of evidence on standardised packaging. I am grateful to the academics who undertook the review at the University of Stirling, University of Nottingham and the Institute of Education. It is being published alongside the consultation document.
	More than 668,000 responses to the consultation were received and the views expressed were highly polarised. Strong views were put forward on both sides of the debate and a range of organisations generated campaigns and petitions. Of those who provided detailed feedback, some 53% were in favour of standardised packaging while 43% thought the Government should do nothing about tobacco packaging. Having carefully considered those differing views, the Government have decided to wait until the emerging impact of the decision in Australia can be measured before we make a final decision.
	Only one country, Australia, has adopted the policy, which it introduced on 1 December last year. New Zealand and the Republic of Ireland have announced that they intend to follow suit. We intend to wait, so we can benefit from the experience of countries such as Australia that have introduced standardised packaging. In the meantime, I want to promote wider public debate about whether we should introduce standardised packaging in this country, including in this House as well as in the media.

Diane Abbott: Mr Speaker, you would have to have a heart of stone not to feel sorry for the hon. Lady, who has been forced to be the face of this humiliating policy U-turn. Once again, the Government have tried to slip out an important policy statement by means of a written
	statement on a Friday, hoping to avoid parliamentary scrutiny. Once again, the Government have completely lost their way on public health and caved into big business. Today, the health of the nation is being sacrificed to the interests of big tobacco.
	The Minister has conceded that the Government’s systematic review found that standard packaging would make smoking less attractive to young people. The Minister will have read the letter signed by 160 specialist consultants and professors calling on the Government not to enact this U-turn. The Minister might have heard the former Health Secretary, the right hon. Member for South Cambridgeshire (Mr Lansley), say:
	“The evidence is clear that packaging helps to recruit smokers, so it makes sense…having less attractive packaging. It’s wrong that children are being attracted to smoke by glitzy designs on packets…children should be protected from the start.”
	The Minister might even remember what she had to say—that she had been “personally persuaded” of the case for standardised plain packaging. The Opposition have to ask what happened. We suspect that Lynton Crosby happened.
	Every single medical stakeholder, every campaigner on tobacco harm and every member of the public who is concerned about the fact that half of all lifetime smokers will die prematurely from their habit and that hundreds of children start smoking every day will be appalled at this decision. It bears no relationship to the evidence and people will die. Will the Minister tell the House whose decision it was to slip out the announcement on a sitting day by means of a written statement? Who was involved in making the decision and can she confirm that Lynton Crosby had no involvement whatsoever in today’s decision?
	There can be no greater responsibility on Government than the heath of the nation. Every single Health Minister has declared their personal support for standard plain packaging and the Minister should be ashamed to have been dragged to the House today to set out this disgraceful U-turn.

Anna Soubry: May I apologise, Mr Speaker, for the fact that apparently I have been speaking far too quietly for perhaps the first time in my life? The hon. Lady clearly did not hear what I said, and I will repeat it. We have not made a decision. We have decided to wait, quite properly, to see the evidence as it emerges from Australia. I make it very clear that there is no change in the policy of this Government. Forgive me, Mr Speaker, but the Order Paper is quite clear—I see it before me—and states that there will be the publication in the Library today of a written statement on the matter of standardised packaging. I just heard a whole load of nonsense going up in smoke.

Peter Bottomley: When I was responsible for reducing drink-driving, I was told that we had to increase the penalties, lower the limit and increase the policing. Drink-driving deaths have come down by three quarters in the past 30 years. The reduction of smoking among men from 82% to about 20% mainly happened before we started throwing the law at everything. People smoke because they take it up as teenagers, and we say they are too young to smoke. We ought to say that only children take it up and to make it as unlikely as people picking their nose in public.

Anna Soubry: I am very grateful for those comments. My hon. Friend is quite right that prevalence is now at about 20%, which is better than in many other countries. There is a very good debate to be had about whether we should take legislative action or change social attitudes. That is why I am so proud of our “Stoptober” campaign and the fact that we have had up to half a million hits on our website. Half a million quitting packs have been given out. It is a subtle combination of many factors. If only there were one silver bullet—but unfortunately there is not.

Kate Green: When the Minister publishes the analysis of the Australian experience, will she also publish an evidenced analysis of the number of avoidable deaths and illnesses that have resulted from the delay?

Anna Soubry: Well, I could say that the hon. Lady’s party, when it was in government, had 13 years to introduce such legislation. Indeed, I am more than happy to say that. If it was so simple to introduce standardised packaging, why did Labour not do it? It is not as simple as they now try to make out. Most importantly, I believe, Mr Speaker—and I do speak as a lawyer—you always want good legislation that is evidence-based. That is why I am more than content to support a delay, while we wait to see the evidence as it emerges from Australia.

Philip Davies: I congratulate the Government on this decision. The Minister will recall that the last time I raised this subject in the House, she told me that I would see the light, and I am delighted that she and the Government are the ones who have seen the light on this issue. She cherry-picked some numbers of people in favour of and against standardised packaging from the consultation. Could she tell us the figures from the full 688,000 responses? How many of those were in favour and how many against?

Anna Soubry: Forgive me; I do not have that information at my fingertips. I am more than happy to supply it to my hon. Friend by way of a letter, or any other mechanism.
	The position I have set out is what we now need, and if there is a criticism that I would make, it is that we went to consultation first. All good legislation needs a good, healthy debate, followed by, perhaps, wider consultation. We now need to have that debate, and I am very happy to lead it.

Chris Williamson: Does this not represent a shameful capitulation to the merchants of death who want to recruit more children to smoke, who will go to an early grave as a consequence? Can the Minister therefore confirm to the House whether or not Lynton Crosby has had any conversations at all with any Health Minister on this issue?

Anna Soubry: I can assure the hon. Gentleman that Mr Crosby has not had any conversation with any Health Minister on this issue. This really is a complete red herring. I can also inform him that I am very proud of the fact that we have banned cigarette vending machines, which will mean that people under the age of 18 in particular no longer have access to cigarettes by virtue of that site of sale, and I am also pleased that by 2015,
	we shall be ensuring that the ban on displays of cigarettes, which are currently banned in supermarkets without the provision of shutters, will be extended to smaller shops.

Mark Williams: One hundred and fifty thousand youngsters are estimated to have taken up smoking since the end of the Government’s consultation, so the time scale is important. Can the Minister reiterate her assurance that this is not being kicked into the long grass, albeit in the outback, as we fear it may well be?

Anna Soubry: As I have explained, there has been no change of policy at all. What we have decided to do, based on the consultation, but most importantly based on what the Australian Government have done, is to look at that evidence as it emerges. I have spoken to the Australian high commissioner—[Hon. Members: “Oh!”] Hon. Members on the one hand claim that this is serious—

Mr Speaker: Order. Let us try to lower the decibel level. Questions should be heard with courtesy, which, to be fair, I think they have been, and the answers must be heard with courtesy.

Anna Soubry: I think this is important. I also spoke with one of the leading experts who have been involved in the legislation in Australia, and I was quite surprised that even after about three or four months, they could not give me a picture of any emerging evidence. That is why we need this time. I believe all good legislation should be based on firm, good strong evidence.

Andrew Selous: I am all for evidence-based policy making, not least from Australia—I declare an interest in being half Australian myself—but the Minister will be aware that my step-sister died of lung cancer at the age of 49, leaving four children. The Minister was kind enough to meet her late husband, whose children have set up the Deborah Hutton campaign to do work, particularly with young people, to prevent them from taking up smoking through innovative use of film and suchlike. What are the Government doing to prevent young people—particularly girls, whose lungs are more severely damaged by smoking—from taking up smoking?

Anna Soubry: I am grateful to my hon. Friend, and it was a great honour to meet members of his family. My own father died, after a lifetime as a heavy smoker, from lung cancer, so we are all well aware of the health risks. My hon. Friend makes the good point about what we are doing specifically to stop children from taking up the habit. I have explained about vending machines. Of course, there is also an EU directive; although it may not find a great deal of favour with some Members on my side of the House, it is a very good directive. Work began on it only a few weeks ago, which will mean, for example, that we will not—[Interruption.] The hon. Member for Streatham (Mr Umunna) is chuntering, Mr Speaker, and it is not always very helpful, as I know.

Mr Speaker: Order. So the hon. Lady knows. Was she perchance speaking as a practitioner?

Anna Soubry: If I were in court, I think I would have to plead guilty to that one, Mr Speaker. In all seriousness—it is a very serious point—one of the things in the EU directive that we specifically looked at was the percentage of the package that should contain health warnings. It is now going up to 65%. There will be no flavourings. Again, this is very important in tobacco products. All this is designed for the next generation.
	It is really important to add this: standardised packaging was about making cigarette smoking unattractive to young people. It is the next generation; that is the fundamental aim. That is why it is really important, even for those who use that aim to argue in favour of standardised packaging, that we find out what the evidence is in Australia, which is doing it. That is why my hon. Friend is right to say that good, evidence-based legislation is always the best.

Barbara Keeley: I am proud that the Labour Government in 2006 gave a free vote on the legislation for smoke-free workplaces. That was an important step forward. Perhaps the Minister should be thinking in those terms now, because today’s decision to take no action will really disappoint the 190 health organisations, including the royal medical colleges and the World Health Organisation, that have supported the move to standardise packaging on tobacco products. Will not they now be drawing the conclusion that the Government, as my hon. Friend the Member for Hackney North and Stoke Newington (Ms Abbott) has said, have given in to vested interests and entirely lost their way on public health?

Anna Soubry: I do not give in to pressure from anybody, and neither does anybody else in my Department or indeed in my Government. We have taken a decision to wait for the emerging evidence from Australia, and that is the right thing to do.

Jacob Rees-Mogg: May I welcome the wise statement made by my hon. Friend today, and remind her that it is often the case that parties in opposition are all in favour of freedom, and when they get into government they are suddenly in favour of the nanny state?

Stephen Pound: You had a nanny.

Jacob Rees-Mogg: I did indeed; I was very fortunate. [Laughter.] It is a pity some Opposition Members did not, but never mind.
	When liberties are removed, it should always be done, as my hon. Friend says, on the basis of evidence, because freedom is very precious, and the state does not have the right to interfere willy-nilly.

Anna Soubry: I agree that the state does not have a right to interfere willy-nilly, but of course standardised packaging does not prevent anybody from buying cigarettes or inhibit their right to smoke cigarettes if that is their choice, so with respect to my hon. Friend, this is not a nanny state argument at all. The packaging would be affected, but people would remain free, as ever, to buy cigarettes and to smoke them.

Ian Paisley Jnr: I, too, congratulate the Government on their courageous and brave decision to do the right thing, and I would encourage the Minister
	to keep on changing in this matter. She has protected 1,000 jobs directly in my constituency today as a result of this, and for that I am truly grateful. But may I also say that with clarion certainty today, we now have a statement from the Government that policy in this area will be based on evidence, not emotion. That is incredibly important, in order that we can get to sensible decisions. On that basis, turning to the tobacco directive, will the Minister now agree for her officials to meet me and industry representatives who employ people in my constituency, given that the Minister’s Department has already met with Ms Linda McAvan, the MEP and reporter, on the tobacco directive, because it is only fair that we have proper, full, evidence-based debate on this matter?

Anna Soubry: The hon. Gentleman knows that he and I do not agree on this matter. Of course, we have not made a decision; that is the whole point. We are waiting to see the evidence as it emerges from Australia before we make a decision. I am more than happy to meet him again, as I have done in the past, but I can tell him: I am not going to meet those whose business is to trade and to manufacture tobacco. It is bad; it is horrible stuff. It kills people. It does great damage to people’s health.

Christopher Chope: I draw attention to my entry in the Register of Members’ Financial Interests.
	I congratulate my hon. Friend on her indecision. I also draw to her attention the fact that there does not seem to be any evidence that the sale and availability of illegal drugs in plain packages has reduced their attractiveness to young people.

Anna Soubry: I could speak for a very long time about illegal drugs and how we make them less attractive to young people. We know, for sure, that we need a subtle mixture of different measures that persuade young people not to take substances that are harmful to them. I am more than happy to have that conversation with my hon. Friend.

Valerie Vaz: Apart from vending machines, what public health initiatives is the Minister going to undertake immediately to stop 570 children a day taking up smoking?

Anna Soubry: We have a number of measures. For example, we have some of the toughest tax and duty measures in relation to tobacco. The “Stoptober” campaign was phenomenally successful last year. We have a TV campaign that is encouraging people not to smoke in cars, for example, as well as our other continuing work. With public health being devolved back to where it always should have been—to local authorities—a number of authorities, notably up in north-east England, have taken grave measures to tackle smoking by educating young people, in particular. This is all good work that will continue through Public Health England.

Penny Mordaunt: I can see the merits of standardised packaging. Companies have invested heavily in equipment to produce complex packet designs in order to make counterfeiting harder. Does the Minister agree that if standardised packaging
	is adopted, whatever the future designs are, the packaging should still be sufficiently complex and difficult to forge? These are just the sort of issues that she and her Department must now look at in depth.

Anna Soubry: Absolutely. One of the problems in this debate is that unfortunately it has been called plain packaging. It is far from plain. As, in effect, the Government would be in control of what goes on to the cigarette packet, there is provision to make it as complicated as possible, with a variety of colours, watermarks, holograms and so on. Far from being a counterfeiter’s dream, it would be a counterfeiter’s nightmare.

Ann McKechin: The Minister said that this is a joint consultation with the devolved authorities. Can she confirm whether Scottish Government Ministers were happy to hit the pause button for an undefined time period?

Anna Soubry: I have been very pleased to have a number of discussions with colleagues north of the border and in Wales. It is a pleasure, as always, to continue to work with them.

Peter Bone: I draw the House’s attention to an interest in the register.
	I congratulate the courageous Minister on making this decision. She has led from the front and done completely the right thing in having an evidence-based decision. The shadow Minister’s attack on her was completely unfounded. This Minister would never do something against her principles; if she thought it was wrong, she would resign. Is not this exactly the way Government should be: evidence-based rather than rushing through things?

Anna Soubry: I agree.

Kevan Jones: It is a first for this Government to determine policy by waiting to see what the Australians do. What time period will there be for the consultation? Has the Minister’s position on this issue, and that of her colleague the Under-Secretary of State for Health, the hon. Member for Central Suffolk and North Ipswich (Dr Poulter), changed?

Anna Soubry: I have absolutely no problem whatsoever with waiting to see how the introduction of the legislation has happened in Australia. The hon. Gentleman knows that the aim of standardised packaging is to dissuade young people from taking it up.

Kevan Jones: How long?

Anna Soubry: I am answering the hon. Gentleman’s first question first, after which I will move on to the next one. That is the aim of the introduction of standardised packaging. If a good experiment is up and running that will produce evidence, what could be a more sensible thing for Government to do? As to the length of time, I cannot answer that question, because we have to wait and see the evidence as it emerges. I thought that we might see some sort of change quite quickly in Australia,
	but we have not seen it yet; I am surprised about that. I am afraid it is a case of “How long is a piece of string?” We have to wait and see how the evidence emerges.

Richard Burden: The Government’s own review found a solid case for standardised packaging, and the Minister says that she is personally persuaded of that case. The Government’s consultation finished not far short of a year ago, and now she says that their position has not changed. Does that mean that their position was always just to wait and see whether anybody else did it before making a decision? If not, what on earth was the point of the consultation and the statements she has made up until today?

Anna Soubry: I appreciate that the hon. Gentleman may have a problem with this, but we have had, and continue to have, an open mind. I have no difficulty with that. We had a consultation that closed in August last year. The Australians passed their legislation and it came into effect in December last year. It is absolutely right and reasonable to see the evidence as it emerges from Australia before making a final decision. That strikes me as responsible, grown-up government.

Karl Turner: When did the Minister last speak to Lynton Crosby?

Anna Soubry: I think it would have been in 2004.

Mark Durkan: Like other Members, I regret that the Government have flinched on this. However, I welcome the fact that the Minister still clearly refutes the fallacy that standardised graphic packaging with markers would in any way aid smuggling or counterfeiters. Will the pause mode that the Government have now moved into still allow them to work with their Irish counterparts, perhaps moving on a synchronised basis in relation to these measures to make sure that this move happens throughout these islands?

Anna Soubry: I am very grateful for those comments. I know that the Republic’s Minister for Health is a firm advocate of standardised packaging. In fact, I think that if he could he would go even further and make tobacco illegal. I hope that he will not mind me saying that in public, but I believe it is his view. It is an absolute pleasure to work with him. We learn from each other. At the various European Union Health Ministers’ meetings we exchange ideas and experiences. That is why—I keep saying it, but it is absolutely right—we must wait and see the evidence as it emerges from Australia.

Ian Paisley Jnr: On a point of order, Mr Speaker. How can I correct what I consider to be misleading information? How can it be the case that the Government have not met representatives of the tobacco industry when I have accompanied them to meet the Government every year since I have been a Member of Parliament and the previous Member of Parliament for North Antrim has accompanied them to meet the Government for the past 30 years? Can that be corrected in some way, because I believe that it was misleading the House to assert that there would be no such meeting?

Mr Speaker: I am grateful to the hon. Gentleman for his point of order. My understanding was that the Minister was asked whether she would meet representatives of the tobacco industry and she indicated that she did not intend to do so. I do not think that she was making any wider claim about what had happened with other Ministers or on previous occasions; she was simply signalling that it was not her intention to meet them. If the Minister wants to speak, she is welcome to do so.

Anna Soubry: I will write to the hon. Gentleman.

Mr Speaker: I think the position is now clear; the Minister has kindly committed to write to the hon. Gentleman.

High Cost Credit Bill

Proceedings resumed.

Jo Swinson: It is delightful to be able to return to the issue of high-cost credit and payday lending after that short interlude for the urgent question on tobacco packaging.
	Before we were interrupted, I was saying that I really appreciate the particularly constructive way in which the hon. Member for Sheffield Central has brought forward this Bill, working with not only the wide range of campaigners outside this House but MPs across the House, including me. I am delighted to accept his request to have further meetings with him and campaign groups to continue to discuss the issue and how we solve the problems that he raises. I would also be happy to extend an invitation for him to meet the chief executive of the Financial Conduct Authority, which will obviously play a crucial role in the industry as it moves to become the regulator. I am sure that the hon. Gentleman would find that useful, as would the FCA.
	It is important to say from the outset that the hon. Gentleman is spot on about the problems in the industry and I agree with him on roll-overs and affordability assessments. We know from the evidence that my Department has commissioned, the Bristol report and ongoing Citizens Advice surveys that all those issues are causing difficulty. I think there is a huge amount of agreement on the issues we are trying to tackle, but we disagree slightly on the solutions and on whether legislation is necessary at this point or whether the Government’s tough action, which was announced in March and has been taken up by the FCA since April, is a better way of tackling the problems. I believe the latter to be the case and the hon. Gentleman disagrees, but it is important to recognise that there is a huge amount of agreement on what the problems are and that they need to be tackled.

Gareth Thomas: Will the Minister confirm whether the Government intend to block this Bill and prevent it from going to Committee?

Jo Swinson: I will confirm that we do not believe that this Bill is the best way to tackle the significant problems in the industry. Obviously, it is up to the House to decide, as is always the case with such matters, whether the Bill should go into Committee, but I and my Government colleagues will not support it if it goes to a vote.

Mark Durkan: A few moments ago another Minister, the Under-Secretary of State for Health, the hon. Member for Broxtowe (Anna Soubry), said that policy should be made on the basis of evidence from elsewhere. There is clear evidence from many other jurisdictions—not least at least 13 states in the United States of America—that competent legislation and regulation exactly such as those proposed by this Bill can be effective and telling. Why are the Government rejecting moving on the basis of evidence and examples from elsewhere?

Jo Swinson: We absolutely are moving ahead on the basis of evidence. We have legislated on this issue. We are transferring the issue of consumer credit to a
	new regulator. It is not as if there is no legislation. We agree that tough regulation is needed to deal with the significant problems in this market, and that regulation is happening. I have confidence in it and in what has happened already, which I will set out. This is about whether further legislation is needed at this juncture and I think that that is the only issue about which there is slight disagreement.

Richard Burden: rose—

Barbara Keeley: rose—

Jo Swinson: I will give way to the hon. Member for Birmingham, Northfield (Richard Burden) and then to the hon. Member for Worsley and Eccles South (Barbara Keeley), and then I will make some progress.

Richard Burden: I am grateful to the Minister for giving way. She has said that the objectives are shared throughout the House but that there is slight disagreement on some aspects. If the disagreement is slight, would it not make more sense to let the Bill have its Second Reading and go into Committee, and then any amendments that she might want to table could be debated? What is wrong with that?

Jo Swinson: The disagreement may be slight, but it is on the basic principle of whether the FCA is best placed to regulate these matters or whether the Government should mandate it to do so through legislation. That is a significant difference in principle.

Mark Durkan: Will the Minister give way?

Jo Swinson: I said that I would give way to the hon. Member for Worsley and Eccles South and then make some progress, but I will be happy to take further interventions later.

Barbara Keeley: I thank the Minister for giving way; she is being generous with her time. As somebody who had a private Member’s Bill that was blocked last year by the guys on the Government back row, I have to say that this is unfortunate. My Bill was a valuable Bill which would have really helped carers and the identification of carers. This is also a valuable Bill which would help people who are in debt. It would be very helpful if the Minister would support its going into Committee, because that could help build a really good public campaign, which is what I intended to happen with my private Member’s Bill. It would be an absolute waste if she let her colleagues on the Government back row talk this Bill out.

Jo Swinson: I share the hon. Lady’s frustrations, having supported private Members’ Bills on Fridays in the past, such as the Climate Change and Sustainable Energy Bill proposed by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz). Ultimately, it got through and was enacted, but getting there was a painful process.
	I hope that I will be able to reassure the House on the issue of protecting vulnerable people and taking action on their behalf. Significant action is already being taken.
	Today’s debate is helpful in raising the issue’s profile, so I thank the hon. Member for Sheffield Central for promoting the Bill, but there is a sticking point with regard to the independence of the FCA and its role as a regulator with real teeth that is able to set its own rules.

Penny Mordaunt: Will the Minister give way on that point?

Jo Swinson: I want to make some progress, but I will mention the FCA later, so I will take more interventions shortly.
	Across Government we share the concerns that have been voiced about payday lending. There is widespread poor practice within the industry and harm to vulnerable consumers. Since the Bristol report on high-cost credit and the Office of Fair Trading’s review of payday lending compliance were published in March, there have, unfortunately, been no signs of the problems going away, as backed up by data from Citizens Advice and StepChange.
	The hon. Member for Sheffield Central said that his preference would not be to ban payday loans. It is important to be clear that there is a place for high-cost short-term lending and that emergency cash or managing a short-term cash-flow problem can be useful. However, it is not right for many consumers, many of whom get lured into taking out loans that they cannot afford to repay and that they should not be given in the first place. Too many people are not getting a fair deal, which is why action is needed and why it is indeed being taken.
	The Government are making this a high priority and I am personally very keen to make progress in changing the industry. It is important to recognise, however, that the solutions are not easy or simple. This is a complex market. A wide range of factors drive consumer behaviour toward financial management and debt. I will set out the action the Government are taking to achieve better, faster and more responsive results than legislation.
	It is also worth mentioning that we have tried very hard to work with the industry on these matters. Indeed, last November the industry produced a payday and short-term loans code of practice. I would argue that if everything in the code was being complied with, there would not be anything like the number of problems that are being experienced, such as three days’ notice from a continuous payment authority—that is mentioned in the hon. Gentleman’s Bill, but it is already in the code of practice—or affordability assessments or better information on constraints and roll-overs. The vast majority of the industry has already signed up to that and I think that the real issue is delivering it, which is why we recognise that further regulation is needed through the FCA.
	We need to assess the progress that is being made with codes of practice so that the FCA has information on how the industry is complying with what it has signed up to. If the industry itself has signed up to something, I am sure the FCA will consider whether it is worth turning it into a firm rule when it publishes its rules. The Department has launched a survey to encourage customers who have used payday loans to undertake a quick online survey of their experiences, so that we can better assess the extent to which lenders are complying with their codes. I tweeted a link to that survey earlier today, if anyone listening is keen to take part in it.

Several hon. Members: rose—

Jo Swinson: I will take a few interventions. My hon. Friend the Member for Portsmouth North (Penny Mordaunt) asked first and then I will take an intervention from the hon. Member for Glasgow North (Ann McKechin), who has not yet intervened.

Penny Mordaunt: I thank the Minister for giving way. I want to respond to the accusation that some of my colleagues and the Minister herself are seeking to talk out the Bill. Although my hon. Friends the Members for Shipley (Philip Davies) and for Christchurch (Mr Chope) are a dynamic duo, I would point out, as someone who is sympathetic to the Bill, that they could not possibly do a better job today than the Labour Front Benchers.

Jo Swinson: I thank my hon. Friend for her description of my hon. Friends the Members for Shipley and for Christchurch as the Batman and Robin of Fridays in the House. We will obviously have to wait to hear what Members want to say.

Ann McKechin: I am grateful to the Minister for giving way. Does she agree that the basic problem is that self-regulation, as in other jurisdictions across the world, has completely failed, and that time is of the essence and that we need to get on with regulation now, not in another two years?

Jo Swinson: I absolutely agree with the hon. Lady: that is exactly the point I was making. We have tried to work with the industry and it has produced its voluntary codes, but the Citizens Advice survey suggests that it is not sticking to them. The industry also committed at the time to monitor the compliance with those codes by this summer. Only one of the four main trade associations in the industry has said that it will do that monitoring; the others have not even agreed to comply with that. That is why we are transferring consumer credit regulation to a new independent regulator, the Financial Conduct Authority, which will have real teeth to clamp down on the problems in this market.

Philip Davies: rose—

Mark Durkan: rose—

Jo Swinson: I will give way to my hon. Friend the Member for Shipley and to the hon. Member for Foyle (Mark Durkan), and then I will make a little more progress.

Philip Davies: I am not sure whether I am Batman or Robin in the Minister’s mind, but perhaps she can expand on that in a moment.
	My understanding is that, a week or so ago, the Government and Ministers held a summit on this issue with interested parties. Will the Minister give us an update on any results of that summit?

Jo Swinson: Absolutely. I will mention the summit; my hon. Friend anticipates my remarks. If he has a little patience, I am sure that he will have the information that he is looking for. I will not comment on whether he is Batman or Robin. Hon. Members can make up their own minds.

Mark Durkan: Perhaps the Joker.
	A few minutes ago, the Minister made the point that the problems are complex and that the solutions will not be simple. Why, then, is she adopting a position of leaving it to the untested, unproven role of the FCA? Simples. That seems to be the Minister’s position and seems to contradict the very arguments that she is making about the nature of this problem. I hope that the role of the FCA will work, but it will be one role among its many other competing responsibilities. We as a Parliament have responsibilities, too. The hon. Gentleman’s Bill is giving us the chance to meet those responsibilities.

Jo Swinson: I understand the hon. Gentleman’s point, but, first, the Financial Conduct Authority is not the only thing that is happening; and secondly, because of the complexity, it is better to have a regulator that is able to make rules and to change them quickly, because markets change quickly. That is the whole point of having a regulator that can be responsive. Otherwise, if primary legislation sets out everything prescriptively, it is much more difficult to respond to changes in the market. Indeed, the Financial Conduct Authority has also made it clear that this is a priority for it. I hope that that provides some reassurance.

Paul Blomfield: I want to restate, as the Minister will know from discussions that we have had, that the Bill does not seek to limit the opportunities for the Financial Conduct Authority to respond to a changing market. It specifically does not include detail; it provides a direction of travel and empowers the Financial Conduct Authority. In that context, would not it be better if we could talk about the detail in Committee?

Jo Swinson: I welcome the hon. Gentleman’s contribution and his constructive approach to this matter, but I would say that his Bill limits the independence of the Financial Conduct Authority. It is not helpful for us to set that out or to mandate exactly what it should do. The FCA is producing a draft rule book for September, which is only two months away—we are not talking about this going into the long grass—and it will be consulted on. I am sure that the hon. Gentleman and other hon. Members will want to contribute to that consultation. That rule book will then be finalised in advance of the transfer of consumer credit regulation, which, of course, happens in April, so it will be in place then.
	Of course, the Financial Conduct Authority will have really tough new powers. The Office of Fair Trading, the current regulator, was mentioned earlier and I will come to its action shortly. We have recognised that stronger powers are needed. The FCA will have new powers to make binding rules on firms, including to ban certain products if necessary. It will have tougher sanctions—for example, the ability to impose unlimited fines and to order redress for consumers who have been ripped off. It will also be setting a higher bar for entry in the first place, so when it is granting a consumer credit licence, the applicant will have to prove that its business model is not based on ripping off consumers. We had the discussion earlier about roll-overs and whether, if some companies are making significant proportions of their profit from roll-overs, their business model in fact
	depends on people’s not repaying in time, and whether that is an acceptable business model. The FCA will be able to look into these issues before people get a consumer credit licence.
	The FCA has made it clear that it is committed to plugging gaps in payday regulation and has outlined four specific areas that it wants to target: first, affordability checks; secondly, continuous payment authority; thirdly, advertising; and fourthly, roll-over loans—all of which hon. Members have rightly raised today as issues of deep concern, and which the FCA has said it is keen to tackle as a priority. Indeed, the chief executive of the FCA, Martin Wheatley, has written to me to outline its work on that, and I will place a copy of that letter in the Library so that Members can have a look.
	The Office of Fair Trading, the current regulator, recently announced a crackdown on payday lenders and has been delivering real results. It has also referred the market to the Competition Commission, to investigate the root causes of problems with payday lending and it can, of course, use its powers to fix that. An investigation by the Competition Commission is a serious thing. It takes a bit of time, which is why we are ensuring that we take other action at the moment—it is important to do that at the same time. However, it is important that fundamental problems within the payday lending market are looked at, and the Competition Commission is well placed to do that.
	The National Audit Office report into the OFT was mentioned. Of course, one of our responses to that has been to ensure that the OFT has further powers. For example, in February, we gave the OFT further powers to suspend a credit licence immediately, if it had reason to believe that that was necessary to protect consumers, rather than waiting to go through the whole process of revoking a licence. We are also transferring the regulation to the FCA, which will have more powers. It is important, in the spirit of balance, to recognise that the NAO also said in its report that it was encouraged by the action that the OFT had been taking on this issue since March. I should like to share with the House a little bit more about where that has got to, because the situation is changing every week owing to the action that is being taken.
	In March, the OFT completed its review into compliance in the payday lending industry. It identified the top 50 firms, which between them make up more than 90% of the market, and did a significant investigation into the practices of each of those. Those 50 lenders were sent a detailed dossier of where their practices were not up to scratch, with a 12-week deadline to sort out the problems that they were causing or face losing their licence. That has brought real results. Those 12-week periods, which are on a rolling basis to enable the OFT to process the responses, have been coming to an end and will all be finished by the end of this month.
	So far, 28 of those 50 have responded to the OFT. I am sure that hon. Members will be interested to hear that 10 of those 28—more than a third—have left the
	payday lending market altogether as a result of that action, either by giving up their consumer credit licence entirely or by continuing to operate in other areas of consumer credit but no longer in payday lending. In addition, a further three licences have been revoked from lenders outwith the 50 largest and one further licence has been handed in. So since March, 14 payday lenders, including 10 of the biggest 50, have left the payday lending market. That shows that the tough action is starting to work. Market exit can be a good thing in a market where there are significant concerns about unscrupulous behaviour.
	To respond to my hon. Friend the Member for Shipley, last week I called the payday lending summit to take stock of the progress that we had made since March and to look ahead to the new FCA regime. We delivered a strong message to the payday industry that it must get its house in order in preparation for the transfer next April. The meeting included regulators from the OFT, the FCA and the Advertising Standards Authority, which has a role in advertising that I will come to. It also involved charities and campaign groups such as Citizens Advice, Which? and those who provide debt advice to individual consumers. It was a successful summit. It was helpful to have that kind of event as the FCA produces its rule book that is due in September. I was very encouraged by the responses from the regulators.
	I will turn to the various issues that are raised in the Bill. First, advertising is something that I feel strongly about. People should not be lured into taking out a payday loan when it is not the right thing for them to do. [Interruption.] I am not sure whether the hon. Member for Harrow West (Mr Thomas) wants to intervene. I am happy to be generous if he does.

Philip Davies: Will the Minister give way to me as she is in such a generous mood?

Jo Swinson: As my hon. Friend recognises my generosity, I will give way.

Philip Davies: I am surprised that the Minister glossed over so quickly the summit that she held on 1 July. According to the statement from the Department for Business, Innovation and Skills, the summit included a “frank exchange of views”, which slightly flies in the face of the picture that she is trying to paint. One of the trade association representatives who attended the summit and highlighted information from a report called “Credit, debt and financial difficulty in Britain” said that those present did not appear to have read the report and were not interested in its findings. Would the Minister like to comment on that part of the summit?

Jo Swinson: I know exactly who my hon. Friend is referring to. I would merely point out that they were very selective in their use of statistics. For example, they ignored the fact that the payday lending market has doubled in recent years. The fact that there was a frank exchange of views in no way contradicts what I said about our delivering a clear message to the payday lenders about what they have to do to get their house in order.
	My hon. Friend the Member for East Hampshire (Damian Hinds) spoke well about how adverts pretend that such loans will solve problems that they will not
	solve. The adverts suggest that a payday loan is the answer to problems such as not having enough money towards the end of the month. If people find themselves in that position, the answer is not to take out a payday loan, but to get some good financial and debt advice.
	When legislating on advertising, the evidence base for what should be brought in and what will work needs to be strong. The FCA will have powers to ban misleading financial promotions and to create rules on advertising payday loans. At the press Q and A after the summit, the chief executive of the FCA made it very clear that he would consider all sorts of rules that could be made with regard to advertising, including on the timing of adverts and the content that needs to be included. The FCA is very clear that it is looking at that issue.
	It is important to proceed on the basis of research and evidence. BIS has commissioned Ipsos MORI to conduct qualitative research into the impact of advertising on consumer behaviour because we want to know what changes would be most effective in helping consumers. It would be easy to pull something out of the air and say, “This is what we should do on advertising,” but we want to know what works.
	My hon. Friend the Member for East Hampshire talked about the wallpaper of life: the little annotations that we hear and see in adverts all the time, such as “terms and conditions apply” and “shares may go down as well as up”. Do we actually respond to all those things or would other things be more effective? The research will look at what health warnings or wealth warnings might work on such adverts, whether signposting debt advice might be more effective, and what is the best way of simply explaining the cost to people. There is a range of reasons why APR is not the most relevant figure in the context of payday and short-term credit advertising, not least of which is that many people do not understand what APR is. Is there an easier way to get that information to the consumers? That research will provide evidence to inform the FCA as it develops its rule book. We will publish the findings in the autumn.
	The next issue is roll-overs. The hon. Member for West Ham (Lyn Brown), who is no longer in her place, made an interesting intervention in response to my hon. Friend the Member for Shipley. She was right to say that people are often not lending £150 at a high interest rate for just two weeks. If it was just for—[Interruption.] I do apologise. The hon. Lady is in her place but I could not quite see her behind the Table. She was right to highlight this issue. If somebody is lending money over a very short period at a high interest rate that basically covers the administration cost of setting up the loan arrangement, that is not necessarily problematic. The problem arises when that short-term loan is no longer short term, but becomes medium or long term because it is rolled over from one month to the next. That is when the APR is much more relevant, because people are taking out a much longer-term form of credit. Roll-overs are therefore problematic. In some cases, even one roll-over is too many.

Kevan Jones: Why are the Government and the hon. Lady opposed to legislation such as that common in Canada, for example, which bans roll-overs in some places or limits the length of a loan?

Jo Swinson: I am not opposed to regulation or rules on that, but the issue is whether it is best for the Financial Conduct Authority or the House to put the rules in place. We have given responsibility for regulation to an independent agency that has tough powers and the ability and expertise to look at specific evidence on what will be most effective, and that is where rules will best be made. The FCA has said it will look carefully at what needs to be included in the rules on things such as roll-overs, and the voluntary code to which lenders have signed up states that they too believe that some restrictions on roll-overs are appropriate within the industry.

Kevan Jones: Would it be sensible to let the Bill go to Committee rather than vote against it today so that some of those issues could be explored, or is the hon. Lady doing the dirty work of the Conservative party and clearing the decks for the European Union (Referendum) Bill?

Jo Swinson: That intervention hardly merits a response. I am here because I am the Minister responsible for issues that affect consumers and consumer credit. We have significant problems in the payday lending industry, and my priority is finding the best way to solve them. I do not believe that the House prescribing these measures is necessarily better than it being done by the FCA. The FCA can put rules in place and, importantly, can change them whenever the market changes. We know that the market is fluid and that it changes regularly. If rules are put in place and practices change to get round them, the FCA can act swiftly to ensure that loopholes and gaps are plugged. That is a better way of protecting consumers, although the hon. Member for North Durham (Mr Jones) is entitled to disagree.

Christopher Chope: Will the Minister give way?

Jo Swinson: I will make a little progress and then I will give way to my hon. Friend. Existing guidance from the Office of Fair Trading includes provisions on roll-overs. It is cracking down on non-compliant lenders, and earlier I mentioned some of the firms that have already left the market as a result of such action. The FCA has power to cap the duration of credit, and could take action to limit roll-overs. The hon. Member for Sheffield Central mentioned the deliberate strategy of rolling over loans, and if there is a flawed business model that relies on such behaviour, the FCA could decide not to grant a licence in the first place. The Competition Commission will also consider that issue in its wider market investigation.

Christopher Chope: Will the Minister give way?

Jo Swinson: I would like to make a little progress, and then I will let the hon. Gentleman make his point.
	Affordability checks are vital. One of the most shocking facts is that nearly half of those who take out a payday loan already show signs of financial stress. We must have proper affordability checks so that people are not given loans when they cannot afford to repay them; all that does is embed them in a further spiral of debt.
	Existing OFT guidance clarifies how lenders should check the ability of borrowers to repay, and it is cracking down on that issue. The FCA will also have powers to
	tackle consumer harm. It has prioritised affordability assessments as an area for potential intervention, and that will be included in the consultation.

Christopher Chope: On the roll-over, if somebody takes out a short-term loan of £150, for example, for a month, but at the end of that month they cannot pay back the loan plus interest, what does the Minister think they should do?

Jo Swinson: It depends on the specific circumstances. Current guidance does not necessarily suggest a ban on roll-overs, but there is evidence that some practices mean that borrowers, including those who are not necessarily unable to repay the loan, are proactively offered a roll-over—for example, by text message. That gets them into more debt and incurs more charges, even though they may have been able to repay the loan. There is a suggestion—more than a suggestion: evidence—that there are problems with roll-overs, but that does not mean that every roll-over is wrong. We also want to encourage lenders to recognise and show leniency when borrowers get into difficultly. That is also important. There is sharp practice with roll-overs, whereby the lender perhaps appears to be helpful in offering extra time when that might not be the right thing for the consumer. We are discussing a short-term product. If a proper affordability assessment is performed, the number of occasions when a borrower is unable to repay a short time after it was granted should be relatively low, and such occasions really should be the result of unexpected emergencies or circumstances that could not have been predicted weeks earlier.
	There is also concern regarding the use of continuous payment authority. This tool allows lenders to dip into a borrower’s bank account to see whether they have enough money in their account to make a repayment, and to do that multiple times—sometimes hundreds—a day. Many card issuers and others in the financial services market are concerned about how that is being done. The Bill suggests three days’ notice of CPA and an awareness of the right to cancel. Those measures are already in the voluntary code. If they were stuck to and ended up in the FCA rules, that would be helpful.
	It is important to clarify that people have the right to cancel continuous payment authority. Indeed, the FCA has recently made it clear to banks that if their customers wish to cancel CPA they have a responsibility to ensure to that that happens. Further, if customers have paid erroneously through CPA after they have asked for it to stop, the banks should refund the consumer. Banks will also have to undertake a review of such cases in the past few years.
	It is important to respond to an issue raised by the Bill, although I accept that it is not something that the hon. Member for Sheffield Central was prescribing. A cap on the cost of credit sounds like a neat and simple solution to the concerns in the market but it is not, as my hon. Friend the Member for East Hampshire (Damian Hinds) eloquently set out. This is a complex market and clumsy interventions could have unintended consequences. The Bristol report findings indicate that a total cost of credit cap could risk harm to consumers, reduce access to credit and lead to less tolerance by lenders of customers with repayment problems.
	The evidence from other countries shows that in some EU member states interest rate caps have resulted in reduced credit access for low-income consumers. In Australia, lenders have imposed charges outside the cap, or developed products outside regulation. Sometimes a cap results in a move to rent-to-own credit. I am sure Members will be aware of places on the high street where technological gadgets can be bought at a very high hire purchase fee. The expansion of this market occurred in Michigan in the US, where pawnbroking thrived following restrictions on payday lending. It is important to follow the evidence.
	The Government have ensured that the FCA’s powers will allow it to impose a cap if it decides that that is the best way to protect consumers, and that doing so is consistent with its statutory objectives. The hon. Member for Sheffield Central talked about a report on the cap and I want to reassure him on what the FCA will have to do. It is already required to set out in guidance how it is achieving its objectives and to report against that in its annual report, which the Treasury will lay before Parliament so that it can be scrutinised by the Treasury Committee. The Public Accounts Committee also has the ability scrutinise any National Audit Office reports on the FCA. The FCA is, therefore, already able to set out in its annual report what it is doing and why, and, importantly, Parliament is able to scrutinise it.
	Before I conclude, I would like to touch on alternatives mentioned by the hon. Members for Harrow West (Mr Thomas) and for Birmingham, Northfield (Richard Burden). Credit unions are an important alternative, and the hon. Member for Birmingham, Northfield mentioned the role that post offices can play. They can help credit unions and it is important to note that they are piloting current accounts, in particular the control account, which is aimed at people who may not have had significant bank accounts before and may want a lot of control over managing their money. We hope to see that rolled out across the rest of the country. Furthermore, the Department for Communities and Local Government is running a competition to get post offices to play a greater role in their communities, some of the prize money from which they could use better to help those in financial difficulty. Financial education is key, however, hence the importance of the Government’s moves to have it provided in schools. Some people taking out payday loans have access to alternatives, but are not using them, partly because the advertising is so effective and partly because of the speed and convenience of payday lending compared with the discussions with a bank about an overdraft.
	Martin Lewis, from Money Saving Expert, has produced an interesting guide on payday lending. Money Advice Service also has a lot of information on its website. Martin Lewis has made the excellent suggestion that if people are worried they might need emergency credit in the form of a payday loan, they could instead take out a credit card, stick it in an ice cream tub filled with water and keep it in the freezer, which might instil in them the discipline of not being tempted to use it for everyday spending. Should they need emergency credit, however, they could use the credit card in the short term and pay it off before the next bill, thereby not paying any interest. There are ways of getting around it, but I appreciate that not everybody will want to follow that advice.
	As mentioned, on credit unions, the Government are increasing the monthly interest cap from 2% to 3%, which will help credit unions, and investing £38 million in helping them to improve their services and compete better with other forms of credit.
	The Government absolutely share the concerns that the Bill is designed to address, but, working with the regulators, we already have a strong package of action in progress to tackle them. In the immediate term, the OFT is pursuing tough enforcement action, with its referral of the market to the Competition Commission, while in transferring consumer credit regulation to the FCA we have ensured a strategic solution to many problems in the high-cost credit market. The FCA’s tough new powers will enable it to take targeted action more flexibly and faster than the Government could. It will have the tools to make balanced judgments on potential interventions based on robust evidence, consultation and cost-benefit analysis.
	I agree with the hon. Member for Sheffield Central about the problems and I have set out how the solutions we are pursuing are already starting to work. I appreciate his introducing the Bill and this useful debate—maintaining the profile of the issue helps to apply pressure on the industry to shape up—but I hope he will recognise that our actions and those of regulators are a better way of tackling the problems. I hope he will take that on board and decide to withdraw the Bill. On the off chance that he does not, and regardless of what happens to his Bill, I look forward to working with him, other hon. Members and campaigners outside the House to clamp down on unscrupulous and irresponsible payday lenders.

Cathy Jamieson: On behalf of the Opposition, I support the Bill introduced by my hon. Friend the Member for Sheffield Central (Paul Blomfield). I was bemused by the claim from the hon. Member for Portsmouth North (Penny Mordaunt), who is no longer in her place, that the Opposition were trying to delay or talk the Bill out; nothing could be further from the truth. In all things this week, I hope I have been a model of restraint, and I intend to continue in that way this morning by making a brief intervention in support of the Bill in order to allow Back Benchers to contribute.
	My hon. Friend gave an eloquent and thoughtful presentation of the Bill. It was interesting to hear him highlight the cross-party support for these measures, built on the growing consensus about what the key components of regulation ought to be. I hope the Minister heard that and took it on board. It was correct that she spoke at length, because it enabled her to lay out the issues, particularly around the summit she held and the other work undertaken. I hope she understands that, as my hon. Friend said, Citizens Advice, Which?, the Centre for Responsible Credit, the charity StepChange and the Centre for Labour and Social Studies—which have all published or given opinions on this issue—have highlighted the difficulties and issues faced by ordinary people who get involved in payday loans. He also paid tribute to the many people who give advice on debt locally. I add my congratulations to them on the work they are doing in difficult economic times, as they try their best to ensure that people have the correct information.
	In introducing the Bill, my hon. Friend laid out the importance of the FCA’s role, which would not be as over-prescriptive as the Minister seemed to suggest. Rather, the FCA would give the direction of travel on key issues and set a clear framework. My hon. Friend did well in outlining those options to take the Bill forward, but also making it clear that he was open to further debate.

Kevan Jones: Does my hon. Friend find it intriguing—indeed, it is quite inexplicable—that the Government are not prepared to allow the Bill to go into Committee to explore some of the issues she is articulating?

Cathy Jamieson: Indeed, and that is one of the points I wanted to make in response to what the Minister said. I know her to be someone who cares about what happens on this issue. To be fair, she has shown that since taking up her post, although I would not necessarily agree with everything she said this morning. Notwithstanding the fact that she said that she did not agree with the principle of the Bill, I suspect that, as an individual, she has some sympathy for what my hon. Friend the Member for Sheffield Central is trying to do. That is why I am somewhat surprised that the Government seem to be responding by not allowing the Bill to proceed to Committee, where there would be the opportunity to explore some of the information in much greater detail.

Barbara Keeley: Was my hon. Friend as surprised as I was to hear the Minister say that our hon. Friend the Member for Sheffield Central (Paul Blomfield) should “withdraw” his Bill? If the Government choose not to support it, that is one thing; if the Minister chooses not to support it, that is another. However, there is no sense in which this excellent Bill should be “withdrawn” by the Member introducing it.

Cathy Jamieson: My hon. Friend makes a valuable point. I, too, was slightly surprised to hear the Minister say that, because on the one hand she seemed to be engaging and listening to what people were saying—not only in this House, but externally—but on the other hand she was apparently closing down an opportunity to scrutinise the Bill in much more detail. I would be interested to see the Bill go into Committee so that we could look at some of those issues, particularly in relation to the FCA, where there might well be tensions. There might need to be some finessing, while other issues might need to be taken forward.

Ann McKechin: Does my hon. Friend agree that it should be for Parliament, which represents the electorate of this country, to indicate how it wishes the industry to be regulated, rather than leaving that completely to a bureaucrat?

Cathy Jamieson: I thank my hon. Friend for that intervention; I know her, too, to be someone who takes the issue seriously. She has done a lot of work on it. Indeed, this is such a high-profile issue—so many people are affected by it and so many external organisations are showing their concern or producing evidence, be they case studies or detailed research—that this would be an opportune moment to take the Bill forward and probe the issue further. The role of Parliament is important,
	and the fact that so many Members wish to speak this morning shows that there is further scope to debate the Bill in Committee, which is what I would certainly like to happen.

Jacob Rees-Mogg: It concerns me that the Bill would give too much flexibility to the FCA and allow it too much arbitrary power. This House should be concerned about that issue on Second Reading.

Cathy Jamieson: I hear what the hon. Gentleman is saying, but I would have thought—again, because I know him to be someone who would take a great deal of care and consideration looking at the detail of the Bill in Committee—that, with his intellect and interest in these matters, he would have been an asset to any Committee that wished to consider the matter further.
	I am surprised and rather disappointed. The Minister herself raised issues about advertising and she seemed to be in agreement in principle with many of the provisions about how lenders should be obliged—although I think she suggested voluntary measures, and I am not sure that that would work—clearly to display the interest payable in cash terms. That is important so that consumers know exactly the position they would be in and could compare the costs of borrowing. The Bill would allow that consistent approach to be determined by the Financial Conduct Authority.
	As I said, and as seen in contributions by hon. Members and the Minister, advertising is an important issue. We have probably all received some of these text adverts attempting to make us believe that we are somehow entitled to take out a payment protection insurance claim and that there is £500 or £800 just sitting there waiting for us to claim it at that very moment—if only we would text back. We have to look further at that issue.
	We have heard that advertising in the background all the time—we see it when we are on the tube, on the bus, on the high street and, increasingly, on websites and the internet, if not on our own phones. The significance is that it seems to normalise the issue—as if it is perfectly normal for people to take out all these loans and as if there is nothing to be concerned about with them. As I say, it normalises that behaviour.
	We heard the Minister talk about the affordability and cost of credit, and we heard the hon. Member for East Hampshire (Damian Hinds) address some of the concerns raised about the dangers of interest caps. He described them as a blunt instrument, and he spoke about how a market for new products can emerge. The issues that the hon. Gentleman raised could be explored further in Committee. His points about the role of the mainstream banks were important, too. He referred to the charging regime and to the need for the so-called “jam jar” accounts. When some people cannot access or have difficulty accessing a basic bank account, it makes it extremely difficult for them to consider saving. He highlighted the importance of financial education and the credit unions to encourage saving, but the harsh reality is that it is simply not possible for many people on low pay to have the financial resilience to save. If a child needs a pair of shoes or a school trip comes up or something unexpectedly goes wrong in the home, they
	might have to use the little savings they have, making it extremely difficult for them to get back on track. The credit union movement has a great opportunity to develop new products.
	My hon. Friend the Member for Sheffield Central spoke clearly about debt collection and the problems that can arise with the continuous payment authority and customers. Sometimes amounts have been withdrawn without due notice given, which can lead to a very difficult set of circumstances, perhaps leading to other bills going unpaid.
	The Bill as drafted would ensure that lenders had to signpost customers to free and impartial advice when they were turned down for a loan or when they were having difficulties with payments or defaults or if a continuous payment authority failed. That is important. The Bill would ensure, too, that the FCA would be able to determine the enforcement powers to be used for breaches of the legislation. Again, I view that as an important issue. I heard the Minister talk about the need to have everyone together and to have the code of conduct encapsulated in the provisions. It was almost as if the bad companies or those that would not adhere to the rules would somehow fall off the end of the world. Unfortunately, that is not necessarily the case, and enforcement is particularly important.
	I said at the outset that I did not want to take a huge amount of time, but I wanted to indicate support for the Bill. My hon. Friend the Member for Sheffield Central and the Members of all parties who have worked with him have introduced an important Bill that should be scrutinised in more detail. There is no doubt that it could be improved through debate and discussion in Committee, with the comments of all the external agencies taken on board. I am disappointed that the Minister has not seen fit to support it, and it would be disappointing if it were talked out or the House did not support Second Reading. I urge Members to give my hon. Friend and those who have sponsored the Bill their support by ensuring that it proceeds to the next stage.

Rebecca Harris: I will try to be as efficient as possible with time, as I am well aware of the preciousness of time on Fridays. I congratulate the hon. Member for Sheffield Central (Paul Blomfield) on introducing the Bill, which contains sensible measures.
	High-cost credit is a serious and growing problem, and the irresponsible actions of some of today’s payday lenders are beginning to resemble little more than traditional loan sharks knocking on the front door. However, the key difference that makes those firms so dangerous is that whereas not every vulnerable household in the country has a friendly neighbourhood loan shark knocking on their door, pretty much every household is likely to have a TV, radio or computer through which they are constantly bombarded with clever and manipulative advertising almost every time they switch on. In many ways, the cheap suit and the cheap comforting grin have been replaced by the cute advertising gimmicks that we heard about earlier. I support the Bill’s recommendations enormously.
	We have heard a lot about the Citizens Advice payday loans survey, which gave frightening statistics about what is clearly still going wrong in the industry. I think
	77% of respondents said they were having trouble paying their loan, and about 65% had extended their loan without being clear how much it would cost them. That is extremely worrying. Only 8% said that they were given any information about the availability of free debt advice, which tells us an awful lot about the problem.
	I do not think any Member of Parliament has not had someone in their constituency who has suffered from payday companies getting them into deeper debt and roll-overs. I wish to give one example, a lady in my constituency who took out three payday loans to help to pay the bills. She was subsequently made redundant, and her relationship broke down due to domestic violence. She was therefore unable to repay her loans, and of course she began to get phone calls from the loan companies—up to five times a day from each company—and letters harassing her to pay. On many occasions, she was wrongly given the impression that they were priority creditors. They put her under a lot of pressure. She tried many times to renegotiate her loans, but she felt immensely threatened. She then went into counselling for domestic abuse, and the lenders’ harassment made her feel more anxious and depressed.
	Terrified, my constituent began to repay the payday loans in favour of her mortgage, which obviously led to thousands of pounds of mortgage arrears and ultimately to her facing imminent eviction. She then got involved with the citizens advice bureau. I give enormous credit to citizens advice bureaux, and I am sure we are all extremely grateful for the fantastic work they do in our constituencies. They should be the first port of call for people in such difficulties, along with the Money Advice Service.
	The fact that someone was pushed to the point of losing their home over payday loans tells us just how pernicious and dangerous they are. I cannot think of a case that makes their irresponsible practices more apparent or better shows why the Bill’s provisions are incredibly important.
	We have talked about marketing issues, and I particularly support the desire to give an indicative cash cost in advertising. I know that the current regulations require companies to give a typical APR in their adverts, which is of course important, especially if there is a possibility of roll-over. However, on the whole it is not relevant if somebody is taking out what they intend to be a short-term, one-month loan. The APR does not give people much indication of their ability to pay the loan back. It is very hard to judge that, and to judge other companies and what they are offering. These loans are often what might be termed distress purchases to cover the cost of a sudden event such as a school trip or a broken boiler, and people are therefore looking for ease of access, but when they listen to these companies’ marketing they could be forgiven for thinking that ease of access is the only factor they should consider when taking out one of these loans.
	I am sure Members will have heard many of the adverts—some may even have particularly irritating jingles rattling around in their heads now—and I have never heard an advert for one of these companies that says, “Our typical APR is just 5,000% per annum and a staggering 8% lower on average than that of our nearest competitors.” They simply do not market on those issues. If they were to give typical cash costs, that would make pricing more transparent for potential borrowers,
	and it could also mean lenders start to compete on that basis in their advertising, which might bring down the cost of these loans and therefore have a further benefit for potential customers.
	I want to say a few words about the proposed restrictions to the continuous payment authority provision, which allows companies to take money from people’s bank accounts. Some payday loan companies have exploited that provision by simply taking money directly out of customers’ accounts on pay day even after those customers have done the right thing and have admitted to their payday lender that they are struggling and might need to reduce their payments. There are even some cases highlighted to us by citizens advice bureaux of customers who have rung up their lender, painstakingly negotiated a repayment plan with it over a number of months, only for it to take the outstanding amount it is owed straight away, leaving them with no money to pay their mortgage and utilities and other household bills. Payday loan companies behaving as if they are priority lenders in this way causes a huge amount of distress in my constituency and around the country, and I welcome the proposal that they should be obliged to give three days’ notice and make it very clear that customers can cancel their arrangement.
	Alternatives such as the credit unions have been mentioned. Credit unions are doing fantastic work. In my constituency there is an incredibly popular one that meets at the St Nicholas church on Canvey island, and I would recommend it to any of my constituents. People in Essex can contact the Essex Savers net credit union based in Chelmsford.
	People can also ask their employers for an advance on their wages, which may very well be met with a favourable response. When I was still running a small business, I would have been very receptive towards staff who wanted an advance. We must also constantly remind people that there is free Government debt advice. It is still the case that few people who use payday loan facilities and are therefore clearly in money difficulties are aware of the Money Advice Service—MA—debt advice or the fact that they can approach a citizens advice bureau. We should not just do the headline-grabbing thing of attacking the payday lenders, the names of which we all know; we must also constantly push forward the alternatives to people who are in difficulties, so they can get control of their finances without handing over large amounts of cash in interest to companies that perhaps do not have their best interests at heart.

Gareth Thomas: It is a pleasure to follow the hon. Member for Castle Point (Rebecca Harris), and I apologise to her for having missed the first part of her remarks. She certainly made an important point at the end of her speech about alternatives, in particular credit unions, and I shall return to that subject.
	It was good to hear the Minister’s contribution. She rightly praised the work of the Office of Fair Trading, but she will understand our considerable disappointment that the Government are set to reject the Bill of my hon. Friend the Member for Sheffield Central (Paul Blomfield), which provides an opportunity to introduce tough new rules to tackle some of the worst excesses in the payday
	lending and high-cost credit industry. Nevertheless, I commend him for the manner in which he has introduced his Bill.
	My interest in the Bill is sparked partly by the number of people in my constituency who have taken out high-cost payday loans, ended up in financial trouble and had to turn to local debt advice charities for assistance. Two particular cases stand out for me, and in neither was the person doing the wrong thing; both were in employment, trying to bring up their families without relying on anyone else. But such is the cost-of-living crisis being faced by too many families across the country, including some in my constituency, that these people got into financial difficulty and made the mistake of applying for payday loans, which has made their situation so much worse.
	The first case involves a single mum, whom I will call Emma. She works part-time and has a 12-year-old son. She was managing fine until her elder daughter, who was contributing to the household bills, left home to get married. The bills did not reduce much when she left and as a result Emma’s wages alone were no longer sufficient to cover them all. Unable to get any help, Emma got behind on her rent and fuel bills, and resorted to taking out payday loans. She took out five, with five different companies, paying interest rates of between 1,700% and 2,900% APR.
	The excellent Harrow citizens advice bureau pointed out to me, with commendable understatement, that anyone who had looked properly at Emma’s overall financial situation would have seen that there was no way in which she would have been able to repay these loans. Interestingly, when the CAB got involved in discussions with her landlord and the utility companies they were both willing to make reasonable arrangements to help her clear her arrears with them over time. The payday loan companies, however, were very different; they took notice only when formal complaints about their behaviour by the CAB to the Office of Fair Trading were threatened.
	The other case involves a single mum who has two teenage girls at school—I will call her Sonika, but, again, it is not her real name. She is in full-time employment but, again, her household budget has been squeezed by the combination of rising prices, notably those for food and fuel in this case, and the fact that her wages have not risen. She was managing okay until a couple of years ago, when she began to fall behind with her rent. She took out a loan to help her pay the rent but then got behind again and took out another one. Soon she could not pay the rent because she was servicing some seven payday loans and by the time she went to see the Harrow CAB she was in absolute despair, facing eviction and homelessness.
	Sonika, too, benefited from the CAB’s support in negotiating repayments on her rent arrears, so she was able to save herself from eviction. But, again, when the CAB came to negotiate on her behalf with the payday loan companies, even though it had her written authorisation for this, initially they refused to negotiate until a complaint to the OFT was threatened. Again, responsible lenders would have seen that she could not afford extra payday loans and would not have advanced the credit. Indeed, they would perhaps have pointed her
	much earlier towards the debt advice charities. She is gradually getting back on track with her finances, but it will be a long time before she clears her debts.
	What is striking is the huge growth in the industry in the past few years alone. Consumer Focus has estimated that the number of payday loan borrowers in 2006 was comparatively small, at 300,000, whereas, as my hon. Friend the Member for Sheffield Central said, by 2011-12 the OFT was suggesting that some 7.5 million to 8.2 million loans had been taken out. Others in the debate have highlighted the considerable concern about the way in which payday lenders are operating, be it the misleading advertising, the fact that they are not doing proper affordability checks, the irresponsible roll-over of loans or the way in which vulnerable consumers get targeted.

Philip Davies: There is lots of talk about irresponsible lending and I am sure that nobody would advocate that. Will the hon. Gentleman at least concede that one of the lessons learned from the banking crash was that when people indulge in irresponsible lending the biggest victims are the people who are lending the money in the first place? There is no great incentive for people to lend money to people who have no prospect of paying it back.

Gareth Thomas: With all due respect to the hon. Gentleman, the payday loan companies seem to have done rather well despite the problems many people have in paying them back. Let me use his intervention to suggest that these are issues we might usefully debate in Committee and an occasional rebel against those on his Front Bench might be tempted to recognise the benefit of further debate, in Committee, on irresponsible lending.

Rebecca Harris: As I rattled through my speech, the point I was trying to convey was how those lending companies often ensure that they put themselves in the position of being the priority lender. They ensure that they get their money back and it is the children who go hungry or the mortgage that goes unpaid otherwise. That is the problem.

Gareth Thomas: The hon. Lady makes an extremely good point and I hope that even at this late stage her words might encourage the Minister to encourage the Whips to allow the Bill to progress to Committee so that we can talk these issues through in more detail.
	The OFT’s report in March demonstrated the clear need for many of the measures proposed by my hon. Friend the Member for Sheffield Central. Indeed, I was struck in late June by the fact that the OFT, in the rationale behind its reference of the payday lending industry to the Competition Commission, asserted that payday lenders appear to derive up to 50% of their revenue from loans that are unaffordable. Borrowers essentially pay far more than expected through roll-overs, additional interest and charges. The OFT seems to be saying, albeit very politely, that £1 billion of the £2 billion the industry was worth in 2011-12 was made by exploiting the most vulnerable. Those are business practices of which the sheriff of Nottingham would be proud.
	Important as the Competition Commission’s work will be, my hon. Friend’s Bill gives the House an opportunity to put in place a series of sensible reforms. He shrewdly allows time for consultation on the details and I welcome
	the opportunity the Bill gives for new powers for the FCA to restrict the amount of high-cost credit that can be advanced to an individual, to limit the level of charges, to deal with the roll-over lending issue that many Members have talked about as well as the way in which advertising takes place, and to require lenders to help fund debt advice.
	It is important to acknowledge that there is clearly a market for short-term lending and that the alternatives to high-cost credit are either not available or not as flexible or responsive as many consumers would like. Clearly in our collective response as policy makers we need to avoid being so draconian that we completely kill off interest from responsible businesses as that would make people vulnerable to illegal moneylenders—loan sharks.
	As well as the actions advocated by my hon. Friend the Member for Sheffield Central and the work of the OFT and Competition Commission to root out the worst behaving businesses, more action is needed to create viable alternatives to the payday lending business model. In days gone by, the social fund might have offered a credible alternative to a payday lender, but the cuts to the fund and its devolution to local authorities mean that access to social fund loans is increasingly a postcode lottery.
	Credit unions are the other key alternative. The cost of a single loan with a credit union can be hundreds of pounds cheaper than a high-cost credit loan. Two examples are worth sharing. A £300 loan taken out over 52 weeks from Provident Financial at 272% APR costs £246 in interest. The same loan from a credit union for the same period at their maximum 26% APR costs just £38 in interest. That is dramatically cheaper. A £300 payday loan from Wonga at 4,214% APR over just one month, costs £95.89 in interest. The same loan from a credit union costs just £6 in interest.
	Sadly, in this country credit unions are still too limited in their reach and coverage. The Government, to be fair, have continued, like the last Labour Government, to invest in credit unions and to make sensible reforms, but a bolder set of measures is needed to reform the reach of credit unions. In the UK, just over 1 million people are members of credit unions, and I declare an interest as a member of the Rainbow Saver Anglia credit union and Harrow’s M for Money credit union.
	Local authorities, social housing landlords, and other parts of the public sector, such as Transport for London and the Metropolitan police, should have an obligation to promote credit union membership to their staff. In the US, Canada and Australia, and even in Ireland, more than 25% of the population are credit union members. Indeed, I think the biggest credit union in the world is Navy Federal in the US. It is the credit union for the American armed forces, with more than 3 million US servicemen and women, from special forces soldiers through to navy cooks, as members. Why do our military not have the same offer for our soldiers and sailors?

Mark Durkan: I speak as the Member of the House who has the highest rate of credit union membership among his constituents. Is my hon. Friend aware that credit unions are now reporting a concern that some debt advisers are telling people to max the loan that they can get from the credit union and use that to discharge their debt to payday lenders? Then the credit
	union is quickly hit with an insolvency voluntary agreement. That is having an effect now on lending decisions taken by credit unions. It is potentially limiting the good that they can do, which he is highlighting.

Gareth Thomas: I am not aware of such circumstances in my area, but my hon. Friend makes a wider point about the crisis that payday lending has induced for many people, and its roll-over impact on credit unions. That seems to be another issue that would be worth teasing out in Committee.
	Perhaps, when we get to Committee, I might tempt my hon. Friend the Member for Sheffield Central to look again at the wording of his clause 4 proposals for a levy on lenders to fund the Money Advice Service. Good as that is, I wonder whether a levy to help to fund the expansion of credit unions is equally urgent, particularly those credit unions in areas of deprivation that have the capacity to offer the equivalent of payday lending products, albeit with far lower interest rates, and therefore much more affordably. Perhaps if we are able to persuade the Friday wolves to allow the Bill to progress, we might have a useful debate on that point. We certainly need to be far more ambitious about the reach of credit unions.
	Lastly, I gently suggest to my hon. Friend one further refinement to his Bill. We need a culture of openness across financial services, as exists, for example, in the United States. By that I mean that we need to get down to local community level—postcode level—to find out what financial services businesses are lending, how they are lending and to whom they are lending. The data should be anonymised, to protect individuals’ confidentiality. That would help us target much better where investment in debt advice, credit unions, or community banking services is needed.
	In Thamesmead in south-east London, not one bank branch is open. It is an area that serves some 55,000 people, and the nearest bank branch is 30 to 40 minutes away by public transport. Lack of access to bank branches limits access to mainstream credit and increases the vulnerability of people and the demand for high-cost credit products. To be fair to the Government, the banks have had some pressure from Ministers, as well as from our ranks, finally to begin to publish some of their lending data, although they are taking a long time to do so. Inevitably, the data will need refining to be useful. That openness is important. The FCA will need to be tough with the financial services industry to get useful banking openness data. We need to make sure that we include the payday lending industry within the scope of that published data so that we have a proper sense of access to financial services in each community. I hope that if the Bill gets into Committee my hon. Friend might be open to an amendment, perhaps to the schedules, that allows the FCA to impose as part of the mix of requirements a need for anonymised lending data by payday lenders to be made public.
	My hon. Friend’s Bill has the potential to make a real difference in curbing the activities of the worst players in the financial services industry. His approach has been exemplary in working with Members on all sides of the House and in wanting to consult before imposing the detail of legislation. Even at this late stage, I hope that his arguments will persuade the Government to think again and allow the Bill to make progress.

Robin Walker: It is a pleasure to follow the hon. Member for Harrow West (Mr Thomas), who made a number of important points.
	This is the first time in my parliamentary career that I have been here on two consecutive Fridays. I am delighted to be strongly supporting two Bills that are very different but both very important to my constituents. It is a great pleasure to speak in this debate, which was ably opened by the hon. Member for Sheffield Central (Paul Blomfield), with whom I greatly enjoy serving on the Business, Innovation and Skills Committee. Although we speak from different sides of the House, I think that I can genuinely describe him as my hon. Friend. I know how much work he has put into this Bill, and it is a credit to him that he has attracted widespread support across the whole House on such an important issue.
	My hon. Friend the Member for North Swindon (Justin Tomlinson) would have been here to speak in support of the Bill but has been detained by issues in his constituency. I pay tribute to the work that he has done with the all-party group on financial education for young people and the major battle that he has won in getting compulsory financial education into the new national curriculum. That is a big step forward that will help to address this issue. I congratulate my hon. Friend the Member for East Hampshire (Damian Hinds) on a brilliant speech that addressed many of the issues involved. I was also pleased to hear my Select Committee colleague, my hon. Friend the Member for Castle Point (Rebecca Harris), raise issues on behalf of her constituents.
	I listened carefully to what the Minister said. I welcome many of the ways in which she has engaged with this topic, particularly her emphasis on the FCA providing strong regulation; indeed, I have spoken about that in previous debates. However, I was disappointed to hear her say that she would not be supporting the Bill, because I think that it should be debated and taken forward. It is interesting that she chose to argue that it would limit the independence of the FCA. In fact, the phrases in the Bill have been very carefully chosen to empower the FCA and to give it flexibility—indeed, in the view of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), who is such a doughty champion of Parliament, to give it too much power and flexibility. We clearly have an ongoing debate on the Government Benches about whether the Bill would tie the hands of the FCA.

Kevan Jones: Does the hon. Gentleman agree that if the Bill went into Committee and the Government had concerns about some parts, it could be amended to improve it?

Robin Walker: I agree with the hon. Gentleman.
	This Bill deserves our support, first because it is a good and well-drafted Bill; secondly, because it addresses a hugely important issue that really matters in our constituencies; and thirdly, because of the polite, sensible and reasonable way in which the hon. Member for Sheffield Central has set about building a cross-party coalition of support for it. He has support from members on both sides of our Select Committee and, as far as I know, from all parties in this House, although the Liberal Democrats have not yet offered any.
	This should not be a party political issue, but an issue on which we are all acting in the best interests of our constituents. As the hon. Gentleman clearly set out, there is a need for measures to protect the most vulnerable consumers from unaffordable loans. The many organisations on the front line, such as Citizens Advice, StepChange, Which? and Christians Against Poverty, have set out a powerful case for change to the way in which the sector works.
	In rising to support this Bill, I pay tribute to the hugely important work of volunteers in providing debt advice, research into the problems of high-cost lending and the steps necessary to protect the most vulnerable from the risks of high-cost credit. Local organisations in Worcester that have contacted me about the issue include Worcester citizens advice bureau, Two Pennies Money Advice, St Paul’s hostel and the Tolladine mission, all of which, alongside numerous church and religious groups, provide invaluable support to my constituents and vital community services. I am very grateful for their support in drafting this speech and the information they have provided to me.
	I have also received a number of letters of support for the Bill from a number of individual constituents and, indeed, from Unite the Union, an organisation with which I do not always find myself in agreement—at least in its national aspect—but whose local representatives I have always found to be reasonable, sensible people who want the best for their members and with whom I have been working closely lately on a couple of issues in the constituency.

Philip Davies: I, too, receive representations from Unite representatives. Does my hon. Friend agree that if this is such a big issue for the Unite union, perhaps it would be better employed withdrawing the £8 million it donates to the Labour party and lending it at low cost to some of its members who otherwise have to go to payday loan firms?

Robin Walker: My hon. Friend makes an interesting suggestion. I would encourage Unite the Union to engage with all political parties and to perhaps provide some of its funding to one nation Conservatives, who can help its members in a positive way.

Kevan Jones: Obviously, the hon. Member for Shipley (Philip Davies) does not understand how political funds work: lending money for that purpose would not be allowed by the law.

Robin Walker: I am grateful to the hon. Gentleman for his clarification, but I am sure the law would allow Unite the Union to contribute to Conservative party funds in the future.

Gareth Thomas: Will the hon. Gentleman give way?

Robin Walker: Having given way once, I want to make some progress.
	The payday and high-cost loans industry has grown fast, as the hon. Gentleman has said.

Gareth Thomas: I am grateful to the hon. Gentleman for giving way. Interestingly, I think that Unite is one of the funders of a banking project in Salford that is designed
	to encourage alternatives to payday lending. Would he like to praise Unite and the other funders of that initiative, which is a little like a community bank?

Robin Walker: I would be very happy to do so. I have already praised Unite for some of the work it does in my constituency. I have no issues whatsoever in doing that.
	Although I am sure many of the companies in the payday and high-cost loans industry will protest that they merely provide a service that their customers want, there are too many examples of people who have been trapped into loans they cannot afford to repay and of vulnerable people who have acted without sufficient advice or without the understanding that we would want them to have of the real costs and risks that they are taking on.
	Research by Which? has shown that nearly 24% of people taking on so-called payday loans are using them to repay other forms of credit. StepChange tells me that constituents from Worcester who have contacted it owed as much as £1,717 on payday loans, which is much more than they are likely to receive in monthly income.
	I have spoken in previous debates in support of the broad concept of capping the cost of lending, but I am aware of the controversies involved. I know that some colleagues warn—and, indeed, that many non-governmental organisations and charities argue—that there is a real risk in setting caps that more people could be driven into a black market and into the hands of illegal money lenders who would charge even more and offer less recourse.

Philip Davies: My hon. Friend has mentioned the number of people who have difficulties with payday loans. We certainly all sympathise with that, but surely in the interests of balance he should also refer to the number of people who are satisfied with their payday loan companies and the 90% or so who say that they would recommend their payday loan company to their friends.

Robin Walker: It is fair to acknowledge, as my hon. Friend suggests, that some people are satisfied, but I am concerned that briefings from these companies tell us that 75% of the people they are lending to are in employment. What about the 25% who are not? We should be worried about them, and about the ones who are trapped in unaffordable loans. The Bill sets out sensible measures to deal with that problem.
	I am glad that the Bill sets out to remind the FCA of its responsibility to consider a cap. That is something that Parliament has previously urged it to do, in an unopposed motion. I would gently point out to the hon. Member for Foyle (Mark Durkan) that the Government have not opposed a cap, and that their MPs have voted for a motion that urged regulators to consider capping. That matter is still very much on the agenda.
	The Bill proposes a number of other measures that could make a real difference, with or without a cap being imposed. Measures to improve the transparency of costs and ensure that advertising carries reasonable warnings seem to be a reasonable and proportionate starting point. Limiting roll-overs of short-term loans
	will be essential if the payday loan industry’s own argument that the relatively small cash cost of a short-term loan is to be believed, and if the argument that theoretical APR is irrelevant is to be accepted.
	If roll-overs are allowed to happen too often, at the very high interest rates that some lenders charge, debts can spiral. It is not in the interest of borrowers or lenders for people to be trapped in a situation in which they cannot pay off their debts. I see no good reason for anyone to object to a limit on roll-overs. Indeed, the Consumer Finance Association tells us that it already carries such a provision in its terms of membership. However, not all payday lenders are members of that association and, furthermore, its terms of membership do not seem to be as rigorously enforced as they might be.
	There are many other positive provisions in the Bill but the one that I want to focus on and which I think could make the biggest practical difference is the idea of a levy. The hon. Member for Sheffield Central has kindly acknowledged my long-term interest in this idea. I have long argued that it is unreasonable that banks and credit unions pay towards the provision of debt advice services but that payday lenders do not. This is a hangover from the regulatory regime that existed under the last Government, and, given the growth of the payday loan industry and other forms of high-cost credit, this matter will need addressing in any event.
	However, I would be inclined to go further than simply putting payday lenders on the same level as lower-cost lenders. We have a responsibility to ensure that consumers are properly informed, but much of the evidence that we have heard today shows that they are not. We need to ensure that every consumer—particularly the most vulnerable—has access to free debt advice and an understanding of all their options when it comes to borrowing.
	The coalition Government have rightly supported the growth of credit unions, as did their predecessor. Credit unions can often provide credit at a much more reasonable rate than payday lenders, as the hon. Member for Harrow West illustrated very well in his speech. However, they do not necessarily have the resources to advertise widely, and their coverage of the country is patchy. I want to see a credit union offering support to my constituents, but since the sad demise of the Black Pear union, we do not have a local organisation in Worcester with the capability to do so. We would welcome credit unions from elsewhere coming in, and I am glad that the Six Towns credit union has entered talks to do so, but it will take time for it to establish its presence and to scale up.
	In previous debates, we have heard the argument that Governments do not set caps for lending costs, and that it would be wrong to interfere in the market by doing so. However, we have a good, recent example of the Government setting out a cap for lending, which has attracted broad support. The proposed 3% monthly APR limit for credit union lending has allowed credit unions to increase the interest that they can charge on loans, and thereby to reach a wider audience. That is still seen as a reasonable rate, as it is far lower than that charged by many payday lenders.
	I would advocate using that cap on credit union lending as the base for a new levy. Organisations that lend above that rate should pay a levy proportionate to
	the amount of interest and costs that they charge, beyond the level charged by credit unions. That levy could then be used to fund free financial advice services. If the levy were set at a percentage of all interest above the 3% monthly rate, it could raise a substantial amount, given some of the rates being charged by payday lenders. Just 5% of Wonga’s profits would equate to £3 million that could be used to provide free financial advice.
	This approach could create a virtuous circle whereby either the market share of the high-cost lenders would be reduced by the prevalence of better and more widely available free advice services, or the amount of free advice to support the most vulnerable consumers would grow as the industry did. It would also have the advantage of providing a financial disincentive for lenders to set their rates too high, and a competitive advantage to the credit unions. It could provide a valuable new source of income for a sector that has faced many challenges in recent years.
	There is a precedent for such an approach in the voluntary support of major players in the gambling industry for GamCare, but in this case, it is important that any levy should be imposed by the regulator and backed by legislation, rather than being put forward by the industry on a voluntary basis. The industry has had plenty of time to consider making a contribution to free financial advice, and so far it has largely failed to do so. There is no evidence that the industry would act in concert to provide the level of support that the financial advice services needed, and I support the idea in the Bill that a levy should be managed by the regulator. I hope that the Government and the FCA will pay careful attention to the case for a levy, whatever the outcome of today’s debate and the progress of the Bill.
	How the levy should be distributed could be a matter for debate. Some might argue, as the hon. Member for Harrow West did, that it should be used to fund credit union expansion, but I believe that a subsidy of any sort would distort the business model of credit unions and could risk making them less sustainable. I have discussed this point with representatives of the credit unions, including Six Towns. It would be better for the levy to provide them with a competitive advantage in being set above their lending cap, and to fund the financial advice that might direct more people to them as customers.
	Some will argue that the levy should be directed towards financial education for young people and the most vulnerable. I would welcome some of it being available for that purpose, but I hope that its primary use would be to fund the valuable work of the voluntary sector in providing free financial advice and to ensure that the type of services that the hon. Member for Sheffield Central has signposted are sustained, supported and expanded so that they reach the people who need them most. I have no doubt that a substantial part of any such fund would be likely to go to Citizens Advice, and rightly so, but it must reach a wider range of voluntary organisations that provide free financial advice and help with debt, including the many valuable faith-based groups that engage in this area.
	I believe that the best mechanism for allocating the proceeds of a levy would be a challenge fund, perhaps managed by the Big Lottery Fund, to allocate funding to debt advice services and financial education initiatives
	according to their reach in communities around the country, with the aim of encouraging support for the most vulnerable.
	To make such a levy workable, it would be necessary to have a central register for payday loans. As the Bill sets out, such a register is desirable in any case. It would help lenders to establish whether their customers have outstanding loans and to avoid overloading people with a range of different debts. This is one area in which I disagree with my hon. Friend the Member for East Hampshire. I point out to him that such a system appears to be working well in Canada.
	If I were to suggest one improvement to the Bill, it would be that it should provide a means for people whose only recourse is to high-cost credit to build up their credit rating so that they can return to the mainstream market. That is something that we might address another time.
	I do not wish to detain the House longer because this is an important Bill and I want it to progress. There is strong cross-party support for the Bill. I hope that Government Members will recognise the value that it brings to an issue of grave concern and the potential that it has to raise substantial revenues for the voluntary sector in a way that can only benefit our constituents. I hope that Ministers will reflect on the many valuable propositions that it contains. I know that some of my hon. Friends are wary of private Members’ Bills and are wont to criticise legislation that they feel is informed by a “something must be done” approach. The case for this Bill, however, is not that something must be done, but that it is the right thing to do.

Kevan Jones: May I begin by declaring an interest? I am a non-remunerated director of the Prince Bishops community bank, which is a credit union in my constituency.
	I congratulate my hon. Friend the Member for Sheffield Central (Paul Blomfield) on introducing the Bill and on coming second in the private Members’ ballot. Having promoted a private Member’s Bill myself, I know the amount of work that is involved. He has picked a subject that has clear relevance not only to his constituency, but to the constituencies of many Members on both sides of the House.
	There have been three excellent speeches from Conservative Members, including the last one from the hon. Member for Worcester (Mr Walker), and I will refer to those in a moment. However, it is disappointing that although the entire parliamentary Conservative party was here last Friday, very few Conservative Members are here today. That shows what their priorities are. This Bill would make a real difference to our constituents, unlike the Bill that they lauded last week, which will make none at all.
	I accept that some Government Members support the Bill and want it to proceed to Committee, where it can be amended, but I doubt whether that will be achieved, because the Minister has said that the Government will oppose it. That is clearly an attempt to keep the channels clear for the Bill that the Conservative party want to proceed, which is the European Union (Referendum) Bill. It is unfortunate that the Liberal Democrat Minister, the Under-Secretary of State for
	Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), cannot be here. I understand that she has had to leave the Chamber because of family commitments. This is not the first time in the past three years that the Liberal Democrats have been hoodwinked by the Conservative party, but it is a classic example of it. A ComRes poll found that about 90% of Labour Members supported further regulation, but that 64% of Government Members opposed it. That shows the priorities that Government Members have, with the honourable exceptions of the Members who have spoken today.
	My hon. Friend the Member for Sheffield Central and others have spoken of the heartache and misery that payday loans are causing in many constituencies. First, I will talk about interest rates and pick an example. For no apparent reason, I will decide on Stockton in the north-east—I am not sure whether the hon. Member for Stockton South (James Wharton) is here today. Let us look at the number of payday lenders on Stockton high street: Cash Krazy, No. 1 Currency—Cash Generator, the Money Shop, Cash Converters, and Ramsdens 4 Cash. Rates of APR—I checked the websites last night—range from 2,400%, to the lowest rate of 897%. That shows the scandal surrounding payday loans. Industry spin says that such loans are for short periods, but as we have heard, and as I know from my constituency, they are not. I will mention roll-overs later in my remarks.

Philip Davies: I tried to get this information earlier from the hon. Member for Sheffield Central (Paul Blomfield), without any success, so I wonder whether I can tempt the hon. Gentleman. According to moneysupermarket.com, borrowing £100 for one month will lead to a repayment of somewhere between £125 and £135. If he thinks that is excessive, what figure does he believe would be an acceptable amount for someone to repay after a loan of £100 for a month?

Kevan Jones: That is an interesting point. The Bill suggests it is for the regulator to determine that and I will give some examples in a minute. I find the hon. Gentleman’s position very strange. I have a copy of the Telegraph & Argus from 7 March 2013—not that long ago. It has a very flattering photo of the hon. Gentleman and the headline:
	“MPs welcome crackdown on payday lenders”.
	That seems a little at odds with what he has been saying today, so perhaps he should go back to the Telegraph & Argus—which I understand is a reputable newspaper—and correct its possibly misleading headline. No doubt this weekend he will explain to his constituents that he is not actually that much in favour of a crackdown on payday lenders.
	Can someone get interest rates that are cheaper than those I have described? Yes, they can. Credit unions have been highlighted already, and as the hon. Member for Worcester (Mr Walker) said, we must also do more to encourage high street banks to contribute to the pot, or offer some type of facilities for these people. Another way of getting a cheap loan is knowing one of the payday lenders. Everyday Loans is owned by a friend of the Prime Minister, Henry Angest, who lent £5 million to the Conservative party before the last general election. On average, Everyday Loans charges 74.8% interest, but the Conservative party paid 3.5% interest.

Jacob Rees-Mogg: The obvious answer to that is that there is no better credit-rated borrower than the Conservative party, the oldest party in history.

Kevan Jones: Given the mess that the Chancellor is making of the economy, I am not sure I agree with the hon. Gentleman. The point is that the Conservative party can accept a cheap loan from a person involved in payday lending, at the same time as many of our constituents and ordinary hard-working families are being charged 74% interest. It goes further. Adrian Beecroft is a major stakeholder in Wonga which, as has been mentioned, charges up to 4,000% interest. He wants us to deregulate more—zero-hours contracts, the minimum wage and all the other things that he wants put forward in a deregulation Bill—but that will cause more of the problem. I am not surprised that he is in favour of it, because it will lead more people to payday loans at exorbitant rates from the likes of Wonga. I am a bit baffled by the Government’s approach to the Bill. It would be sensible to send it to Committee, debate it and if they want to amend it, they can bring forward proposals.
	The heart of my point is how policy is influenced. The Prime Minister said this week that nobody buys Conservative party policy. We have heard very good contributions from Conservative Members who are clearly in touch with what is happening on the ground. However, while the Conservative party chairman, the Minister without Portfolio, the right hon. Member for Welwyn Hatfield (Grant Shapps) has described payday lenders as “obscene”, he is not afraid to accept their money.
	Representatives from Wonga attended an event at the Conservative party conference that was described as a “speed dating event”, at which the Economic Secretary to the Treasury, the hon. Member for Bromsgrove (Sajid Javid), the Exchequer Secretary to the Treasury, the hon. Member for South West Hertfordshire (Mr Gauke) and the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon) spent 20 minutes at each table. The idea of speed dating two of them might not seem too bad, but the idea of speed dating the right hon. Member for Sevenoaks is taking things too far.

Philip Davies: The hon. Gentleman is thrashing around trying to throw mud in every direction. In relation to the mud he was trying to throw at me, when I think he was alleging that I was acting in an inconsistent manner, he clearly does not read the mud he has been throwing. If he read the article he would know that I said:
	“I am sure everyone supports the OFT in their aim to have an industry which operates responsibly. However, we must tread carefully. Removing legal lenders through well-meaning legislation and regulation will not reduce the demand for their services, it will just push people to illegal loan sharks whose way of operating is often utterly unacceptable and much worse for their customers.”
	Did the hon. Gentleman read what I actually said in the article he quoted, or was he just hoping that if he threw enough mud some would stick?

Kevan Jones: I think the mud is firmly stuck on the hon. Gentleman. From his comments today, I would suggest that he has been an apologist for the payday lenders rather than someone calling for a crackdown. All I am
	saying is that he might want to correct the
	Telegraph & Argus 
	headline. He has used this debate to support the payday loan industry, rather than support a crackdown.

Philip Davies: The hon. Gentleman is just highlighting his own ignorance. If he read the article, which he clearly has not, he would know that it quoted all the Bradford MPs. The article was not specifically about me; it was about what all five MPs in the Bradford district said. The headline was a reflection of that, and not what I said. My views were made perfectly clear then and they are consistent with the points I have been making today.

Kevan Jones: The hon. Gentleman must have a very good relationship with the Telegraph & Argus—I do not have the piece here; I just wrote it down—because there is a blooming big photograph of him next to the “crackdown” headline, when it is not a crackdown but the back-down that he has put forward today.
	Returning to the speed dating initiative and the influence on Conservative party policy on this area, the party’s response was:
	“It is essential for good regulation that ministers and others meet with and listen to the views of the businesses they regulate as well as those who campaign for tougher measures.”
	I do not think that anyone would disagree with that, but why should the option to meet Ministers cost £1,250? Will my local credit union or some of the victims of payday lenders have access to those Ministers? No. This is privileged access to senior Ministers bought by raising money for the Conservative party. Payday lenders indicated that they wanted light-touch regulation, despite ordinary people suffering at their hands.
	As others have said, payday lenders look like Robin Hood in reverse; they take money from the poor and give it to the rich, and some of the Government’s policies will only make it worse. If people have to wait seven days to apply for jobseeker’s allowance, it will be a bonanza for the payday loan industry. If someone is made redundant and has no savings, what do they live on? They will go to a payday lender and get into the cycle of debt already described. The hon. Member for East Hampshire (Damian Hinds) made a good speech, but I do not think he understands that a lot of people do not have savings, have no recourse to family members with large savings and are living from week to week—in some cases from day to day. I work with credit unions encouraging people to save small amounts—I accept his point about that—but, as the hon. Member for Worcester said, credit unions will not solve the problem, unless we make an effort to expand them.
	There is another problem waiting to hit this country big time, and it does not just concern people suffering now: an increase in interest rates. Yesterday, The Times reported that if mortgage interest rates rose by 2%, 800,000 people would be spending more than 50% of their income to pay off their debts, and that if they rose by 4%, that figure would be 1.2 million. This is a time bomb. Currently, we rely on low interest rates, but if they rise, the situation will get serious, with a lot of people struggling now needing support, and a bonanza for the payday loan companies. I am not surprised that,
	as someone said, many American companies have moved away from that regulated market to what must seem to them like the Klondike.
	I want to raise a question I have come across in my constituency, and one that has been raised already: can these people afford to pay back this money? In most cases, the answer is no; and the lenders know that. Their record on background checks is poor. It is like with heroin addicts. These payday loan companies get people on to it, and then keep them on it. That brings us to roll-overs, which the OFT, like my hon. Friend the Member for Sheffield Central, have criticised. Once people get into debt, it just carries on, so it is a bit like heroin. People get hooked and never get off the treadmill. That must be stopped.
	The hon. Member for Castle Point (Rebecca Harris), who is no longer in her place, mentioned the misuse of the continuous payment authorities. This comes down to financial education. People are not aware that these debts need not be the priority. Often, they are treated as the priority, however, because people have been led to believe that they have to pay them off before their mortgage and other debts. That definitely needs explaining and regulating, which the Bill would do.

Mark Durkan: Does my hon. Friend agree that some of these businesses are basically committing usury and that the arguments against the Bill are nothing more than “excusury”?

Kevan Jones: It is an excuse not to do anything. Those who oppose the Bill, including the Government, have to recognise that this is a real issue, and not only in constituencies such as mine. The hon. Member for Worcester, which is very different from Durham, said that these companies have gone into different areas and are using these aggressive tactics. I looked last night at the list of Stockton payday lenders. Some of their websites are very attractive—bright advertising and so on; clearly that needs to be regulated.
	Why can we not act in this country? I think it was my hon. Friend the Member for Glasgow North (Ann McKechin) who mentioned the highly regulated American system. The other system that seems to work is the Canadian one, which can cap interest at 7%, as opposed the rate on similar loans in this country, which is 70% to 74%. If those countries can do that and ban, for example, roll-overs, why can we not do it here? It is about political will, and that goes back to the point I made earlier.
	Why do the Government not want to do those things? They have clearly been lobbied extensively by the sector. Some may argue that they have a direct financial interest in raising money from the sector and accepting loans off the individuals involved. They will not introduce the regulation that would help people. If we are looking this issue seriously, we need to ensure that the policy is not only reactive but morally right. Legislation should be introduced, but the Government are putting their vested interests ahead of those of many of my constituents.

Mark Durkan: I thank my hon. Friend for giving way again. Does he recall that when the Government were taking through the Financial Services (Banking Reform) Bill—which makes far more provision in respect of the FCA, the PRA and the new regulatory system—they
	made of a point of saying that it rightly provided more indicators from Parliament for issues and options to be considered in relation to the FCA’s other functions, because the evidence was that that had been missing from the previous regulatory regime. Surely this Bill is simply colouring in the equivalent considerations in respect of this power for the FCA.

Kevan Jones: I am going to do an unusual thing now and agree with the hon. Member for North East Somerset (Jacob Rees-Mogg), who said that this House should have control of those things. The de facto position under this Government—and, I have to say, the previous Government—is that the best way to do these things is to create an arm’s length regulator, which will somehow sort the problem out. I am not opposed to that—although the episode involving the Independent Parliamentary Standards Authority this week has shown that it can backfire a little—but if we are to have a regulator, Parliament has to set clear guidelines. I am therefore not opposed to external regulation, as long as it operates according to a clear set of guidelines, which this Bill would set out. Indeed, that is the strongest aspect of this Bill.

Philip Davies: The hon. Gentleman seems to saying that he wants roll-overs banned. I wonder whether he can answer the question asked by my hon. Friend the Member for Christchurch (Mr Chope) earlier. If somebody comes to the end of a loan and cannot pay it back, for whatever reason, what does the hon. Gentleman suggest they should do?

Kevan Jones: There are two issues about the situation the hon. Gentleman describes. He asks, “Would it work?”, but he should look at Canada, where there is already a limitation of, I think, four months. First, I would ask the lender, “What credit checks did you do on the individual in the first place to lend the money?” Secondly, the company should try to work out how that individual could pay—whether over a longer period or something like that—but certainly not sucker them into another loan, which is what happens now. The hon. Gentleman is being naive—he is obviously not keen to crack down as hard on payday lenders as the headline suggests. The point is that if someone cannot pay back the first loan, how on earth are they going to pay back the second one? These companies know that. I do not want to call the hon. Gentleman naive—he is certainly not naive—but he is being naive in arguing that payday lenders somehow do not know that once they have got people hooked on that line of credit, it is in their interests to keep them on it.
	Let me turn to credit unions. The hon. Member for Worcester made some good points about credit unions. I agree with him on one point: I am opposed to giving money to credit unions to top them up. However, he also raised some good points about a levy and how it could be used. Financial education and promoting access to credit unions would be a good idea. If they became beholden to the grant as such to keep them going, that would be a mistake. He therefore raised a good point. He has certainly thought about the issue and is right.
	Finally, the issues that this Bill addresses are affecting millions of our constituents. Frankly, what is happening is a national scandal. These companies are taking money
	from the poorest and most deprived communities and individuals in this country and making millions of pounds out of them. I do not know how these people sleep at night; they are causing absolute misery. One thing that we in this House can do is to take steps to put right any injustices we see.
	It is absolutely appalling that the Government oppose this Bill and will not allow it to go into Committee. This has nothing to do with the Bill itself; it has more to do with another Bill that the Government want to get through—the European Union (Referendum) Bill. They want to kill this Bill and allow the other one through. I hope that the millions of people up and down this country who support regulation will recognise what the Conservatives are doing. They put party politics over Europe higher than the misery of millions of our constituents, which is a complete disgrace. I have to add that it is not just the Conservative party, because not for the first time the Liberal Democrats have been hoodwinked into supporting the Tories.
	I support this Bill because millions of people need the protections it provides. It should be allowed to go into Committee. It is not perfect; it can be amended and the Government could actively work to improve it in line with some of the sensible suggestions that have come from Conservative Back Benchers, including those of the hon. Member for Worcester, which would help to solve the problem of injustice. Am I angry that the Government are killing this Bill today? Yes, I am, and I think many other people will be, too.

Jacob Rees-Mogg: I begin by referring hon. Members to my declaration in the Register of Members’ Financial Interests—not, I am glad to say, because I am a payday lender, but because I am regulated by the Financial Conduct Authority and am therefore involved in something that is relevant in the broadest sense.
	It is always a great pleasure to follow the hon. Member for North Durham (Mr Jones), who is one of the most gripping speakers in this House. I am glad that he always speaks at sufficient length that his thoughts can be developed, which is invariably helpful to the deliberation on Bills. I was glad, too, that we agreed on the one point about Parliament regulating things rather than handing them out to random bodies. There is, however, one thing on which we disagree—his conclusion. I am going to say quite straightforwardly that I oppose this Bill. I congratulate the hon. Member for Sheffield Central (Paul Blomfield) on introducing it, but I do not think it is the right answer to the problem. There are different answers to it, some of which I shall try to cover.
	Let me start, however, by placing the problem in its historical context. The issue of usury, as the hon. Member for Foyle (Mark Durkan) rightly called it, is one that goes back to the most ancient times. The Hittites, the Egyptians and the Phoenicians were all lending each other food, substances, bits and pieces and getting them back. It is always a pleasure to mention the Phoenicians because it is believed that Joseph of Arimathea brought Jesus himself to Somerset on a Phoenician trading vessel. It was quite near Bristol, so we never know whether our lord might have gone there, too. This is the ancient
	history of usury: it is almost as old a profession as the oldest profession; it is part of human nature to lend things and have them returned at interest.
	Usury is an issue that has troubled theologians over the years. The Old Testament includes particularly strong statements against it. I shall quote only one, the first one from Exodus 22:25:
	“If thou lend money to any of My people, even to the poor with thee, thou shalt not be to him as a creditor; neither shall ye lay upon him interest.”
	Even in the Book of Exodus, limits are being set on the amount that may be charged on the repayment that is to come.

Barbara Keeley: Is the hon. Gentleman going to move on to the example of Jesus throwing the moneylenders out of the temple of Jerusalem?

Jacob Rees-Mogg: Perhaps the hon. Lady refers to:
	“You have made my Father’s house a den of thieves”.
	I was not going to quote that because I thought it was so well known that it would be unnecessary to trouble the House with it. Interestingly, however, the money changers in the temple were changing ordinary Roman coinage into the special coinage used in the temple for buying sacrifices and so forth, and making a very healthy return on that. I am not quite sure that it is the same as usury, which is another reason why I was not going to mention that precise example. However, it is interesting that these issues have come up over the years.
	The councils of the Church have considered the matter. At the council of Nicea, the Church council that set out the Creed also decided that the clergy may not lend money at interest, and that interest may not be charged above a rate of 1% a month. The same issues were being discussed then—the rate of interest being charged and who may be involved in the process. The rather splendid Pope Sixtus V—I rather like somebody called Sixtus V; there seems to be some incongruity in it—said that charging interest was
	“detestable to God and man, damned by the sacred canons and contrary to Christian charity.”
	We see that these issues have been problematic for not just hundreds but thousands of years. They have been debated by theologians and looked at by economists.
	The fundamental point is that there are people who have money to lend and people who want to borrow, and bringing the two together, when done in a suitable way, is beneficial to both sides. It makes it possible for people to spread payments, make investments and order their lives in a way that is convenient to them, and at the same time it makes a profit for the person on the other side of the transaction, who has excess capital to lend out. However, with that come difficulties and problems that Governments have sought to solve over generations.
	At this point, I think it is relevant to quote the introduction to Henry VIII’s Act against usury, which shows the context of the problem. It states:
	“Where before this Time divers and sundry Acts, Statutes and Laws have been ordained, had and made within this Realm, for the avoiding and Punishment of Usury, being a Thing unlawful, and of other corrupt Bargains Shifts and Chevisances, which
	Acts Statutes and Laws been so obscure and dark in Sentences, Words and Terms, and upon the same so many Doubts Ambiguities and Questions have risen and grown, and the same Acts Statutes and Laws been of so little Force or Effect, that by reason thereof little or no Punishment hath ensued to the Offenders of the same, but rather hath encouraged them to use the same.”
	That, I fear, is why, in the end, I am not going to support the Bill. What happens is that Parliament legislates to rectify a problem but finds that what it legislates does not actually do that. Henry VIII’s Act was repealed within six years. It was against usury and also set a maximum rate on mortgages of 10% per annum. However, it did not work, because there are always people needing to borrow money and people willing to lend it to them. The question is how that is done, at what stage in the process and who is involved.
	Having a source of borrowing within a regulated business system is preferable to loan sharks, who have been mentioned. We hear about “legal loan sharks”, and they may become illegal in some of their practices, but as far as I am aware Wonga, however bad a company it is, does not send people round with baseball bats. There seems to be a fundamental problem in legislating in a way that will push people in difficulties in that direction.

Kevan Jones: I agree with the hon. Gentleman, but in many cases such companies use financial baseball bats on people.

Jacob Rees-Mogg: But the difficulty is that the loan shark uses both financial and physical baseball bats. That is not to say that the behaviour of Wonga is good, and I will come on to that. However, there are already measures available for a crackdown, to use the word we heard earlier, on the operations of such companies. I accept that there are problems with the way in which such lenders operate. I oppose the Bill not because I do not think there is a problem but because there are already measures that can be taken but are not being taken. Another statute is not the answer to the problem.
	That leads me on to the FCA and the normal laws. If I may, I will cite the case of a constituent who came to me not because he had borrowed money from Wonga but because it came after him saying that he had. Somebody had used his name, had borrowed I think about £300, and had got it deposited in a criminal bank account—a bank account not belonging to my constituent. Wonga then came after him and said, “You owe us this money. Please may we have it back?” He is a wealthy man, so he would have had no difficulty paying this money if he felt like it, but he was also not the sort of person who was going to be fiddled around with and pay money that he did not owe. So he said to Wonga, “I do not owe it. I never took out that loan. That is not my bank account.” Wonga wrote back saying, “That’s absolutely fine. We’ll write it off.” He said, “No, that is not absolutely fine, thank you very much. That is criminal activity and I should like it reported to the police.” He reported it to the police, but he was not the sufferer of the crime. It did not affect him. He was not short of £300; merely his name had been used. The police therefore would not do anything on his account and Wonga refused to report it to the police. Therefore it was allowing a crime to be committed and in effect rolling up the cost of that into the interest rate it charged to the
	people who borrow from it—in a payday loan at a very high rate, as has been mentioned—and taking that as a cost of doing business.
	I have a serious gripe with that on two counts, which I know very well from my own business life in financial services. The first is that there is a basic principle of know your client. If somebody comes to my business and wants to invest with us, we have to know that client. We have to understand what their objectives are, what their wealth is, what their situation is, what type of investment is suitable for them. We have also to know who they are—who they really are, that they genuinely are who they claim to be. The know your client rule is at the absolute heart of financial regulation in this country, but for some reason Wonga and the payday lenders can completely ignore it.

Kevan Jones: They actually do know their clients. They know that if they lend money to them they will get them on the lending circuit. They know these people cannot pay, and that is a way of getting into roll-over loans, which increase profits.

Jacob Rees-Mogg: The hon. Gentleman makes an interesting point, but knowing your client is not knowing a group of clients or a class of clients; it is knowing your client as an individual—as a person. That has been in the rule book of the FSA before and of the FCA now, and of IMRO before them. It is a fundamental rule of financial services that we should know the counter-party with whom we are dealing and we should not deal with that counter-party if we do not, because we have a regulatory obligation to ensure the product we are offering is suitable to them. This seems to me to be a matter not of legislation, therefore, but merely of the FCA covering the bodies that are making the payday loans through its existing regulations, which would need very little change. That is a very straightforward means of putting this anomaly right.

Philip Davies: I am, as ever, very interested in what my hon. Friend is saying, but to what extent should payday loan companies get to know their clients? Is he simply asking that they get evidence of people’s bank statements or pay slips, or does he envisaging something more onerous?

Jacob Rees-Mogg: I suggest that the know your client obligation should be as strong on payday lenders as on somebody who was receiving an investment of a similar amount—that they should have an obligation upon them to know who their client is and to understand whether what they are offering is suitable. It would be as if someone went to Hargreaves Lansdown to get investment advice; they should know the customer as well as Hargreaves Lansdown would.
	The second count is to do with an absolutely standard part of all financial service regulation: money laundering. It is drummed into anybody who works in the City that money laundering is one of the most dangerous things they can be involved with, and that anything to do with money laundering—any passive participation in money laundering—is a very serious offence subject to high penalties. The basic rule for an investment firm is, “If you hear about money laundering or have the vaguest suspicion of money laundering, you must inform the
	senior person—the money laundering officer—in your business, who will then decide whether to report that to the police.” The payday lenders clearly have no obligation to follow the money laundering laws that are already on the statute book, however. We do not need more laws; we need existing laws to be used.
	Why do I think that? Let me go back to the example of my constituent and the £300. If the lender were paying it into a bank account of which they had no real evidence—no proper knowledge—that was a golden opportunity for money laundering. If someone can just ring up and say, “I would like to borrow a few hundred pounds,” and it is instantly put into an account in the name of someone who is not necessarily the person who has rung up, and is then paid back with a cash deposit, that is the most fantastic way of money laundering. Not only that, but the price paid of a month’s interest is a modest amount to pay to wash the money through the system. So this aspect of payday lenders’ operations would allow money laundering to take place—I have no evidence on whether or not it is taking place—in a very easy and straightforward way.

Philip Davies: Again, I bow to my hon. Friend’s expertise in this sector that I do not have. Do the money laundering regulations relate to moneys above a certain amount? Is that why payday lenders, which are generally lending very small amounts, do not appear, as he says, to be covered by that legislation and regulation?

Jacob Rees-Mogg: My hon. Friend is right; there are aspects of the money laundering regulations that set thresholds. For example, someone can bring only £10,000 into the country in cash—such a rule applies to many countries around the world in their equivalent currencies—and certain sums have to be reported, if they are cash transactions, by banks and so on. One part of the rules also deals with aggregations. Using a succession of small transactions is one way in which money launderers try to launder money, because the rules on higher sums have become relatively effective. Before legislating we should always want to look carefully at whether regulations that are already available could improve the system. The use of the two I have mentioned, relating to knowing one’s client and money laundering, would put a strong burden on the payday loan companies to ensure that they were lending to people they at least knew really existed and about whose financial circumstances they knew something. They would, thus, be able to lend to people who had a better chance of paying back.
	The issue of people having a better chance of paying a loan back is important, because payday lenders have a cavalier approach to how they lend and so they build into their interest rate a high level of default, which means that people who can pay back, even though they may not be the greatest debtors, pay a much higher interest rate than would otherwise be necessary for them. If the business of the payday lenders was more tightly regulated so that they knew their underlying client and if the level of bad debt was brought down, the rate of interest would come down and the problem would be reduced in that natural and evolutionary way, rather than by trying to set caps and controls.
	I have great difficulties with caps on interest rates, for the straightforward reason that no business is going to make a small loan if the interest rate is capped, because
	the administration of that loan will simply be too expensive to make it worth while. A £100 loan is likely to involve £5 to £10 of administration, whether that loan lasts for a day, a week or a month. So the rate for a week is extraordinarily high because it is being compounded over the course of a year. Setting caps is therefore not the right way to proceed, because it takes away the ability to borrow from the people who are most in need of these smaller sums at the bottom end of the scale.
	The truth is that the bigger the borrower someone is, the better the interest rate they are likely to get. The hon. Member for North Durham (Mr Jones) talked about the Conservative party borrowing at 3.5%—of course it borrows at that rate. People who are borrowing millions of pounds pay low rates of interest, because usually there is some collateral against the loan, they are more likely to have a track record on lending and the interest rate covers the administrative cost. Where someone is paying 3.5% on a £5 million loan, the administrative costs are comparatively negligible. On a £100 loan repayable within a week, the 3.5% is so negligible that it would not begin to cover the administrative costs, and so what does the holder of capital do? They do not make the loan to the individual who needs it to get through that weekend. We must be careful about what we seek to regulate. If we seek to regulate one aspect of the system, we may well find that the unintended consequence is that the people who are most in need of this source of borrowing are cut out of the market altogether. In that case, they have no alternative but to go to the loan shark.

Mark Durkan: Does the hon. Gentleman not recognise that what he has just mentioned is already in statute among the things that the regulator would have to consider in relation to any of its other powers or options?

Jacob Rees-Mogg: The Bill is calling on the regulator to exercise those powers and I know that there was a vote in this Parliament to encourage the regulator to investigate the issue. That takes me back to my point and that of the hon. Member for North Durham: Parliament ought to decide these matters. We cannot simply say that this is too difficult for us to do, with all the resources we have and as the representatives of the British people, and that we will therefore hand it over to these grand panjandrums. Parliament’s job is to set the laws, not to delegate the powers to set the laws to unaccountable and unelected bodies. We have to stand at the next election saying, “These are the laws that we have passed,” not, “Well, we think this is frightfully difficult so we have decided on a quiet Friday that we will not do it ourselves but will past it on to the FCA.” That seems to me to be not only an abandonment of our duty but most unsatisfactory from the electorate’s point of view.
	The electorate cannot hold the FCA to account. I do not even know the name of the chairman of the FCA, which is a lacuna in my knowledge that I probably ought to put right speedily. He is probably a very great man, but he is not accountable to the people of North-East Somerset. That is unfair on my constituents. There ought to be accountability on these crucial decisions that will affect their lives. There is no question about the
	fact that payday lending is an important part of the lives of people who are involved in it, and a very difficult one.

Mark Durkan: The hon. Gentleman must forgive me, but I think I recall him saying in a previous debate on possible financial regulation that Parliament should just leave things to the Governor of the Bank of England’s eyebrow, the way things had always been done.

Jacob Rees-Mogg: The great thing about the Governor of the Bank of England’s eyebrow is that it is not a matter of statute. We have not put it in statute—indeed, I cannot think how that the statute would be phrased—that the Queen’s most Excellent Majesty, her Lords temporal and spiritual and her House of Commons have decided that the Governor of the Bank of England’s eyebrow should have legal force. It is not an accountability issue. I must confess that such legislation was rather better drafted under Henry VIII than nowadays. The language used in the section I read out has the greatest attractiveness and beauty, whereas ours is rather more mundane, but even in the 16th century—before the Bank of England was even founded—the Governor’s supercilious qualities could not have been brought into statute law.
	Let me move on to one of the issues raised by my hon. Friend the Member for East Hampshire (Damian Hinds), who made an absolutely fabulous speech and covered the issues with the greatest intellectual rigour. He got into the question of supply creating its own demand and demand creating its own supply. There is an important quality about demand creating its own supply and that is that it tends to reduce prices. If we regulate, we find that we interrupt the natural creation of the supply that comes through. Let us look at it this way: if more payday lenders come to the market, they provide excess capital that is available. They want to lend it out and they have it on their books. They then have to advertise and build up the market. They produce the supply available, but others are doing the same. There is then an excess supply in the market and the demand will fill it up, but only if the price falls. If we regulate in such a way as to reduce the supply that is coming on board so that that excess of credit is not made available in the market, the price will increase as there will be fewer people participating in the market.

Robin Walker: Was my hon. Friend as surprised as I was, given his point about the availability of supply potentially reducing costs, to hear the Minister celebrating from the Front Bench the fact that people are exiting the market? Would he not agree that we ought to be encouraging people to take part in the market in a more responsible manner rather than driving people out of it?

Jacob Rees-Mogg: I am in agreement with that. I think we have to be careful, therefore, about introducing new regulation, because new regulation has a tendency to drive people out of the market, or, worse still, favour the largest players, who find it easiest to deal with the regulation, and will then create an oligopoly or ultimately a monopoly, which of course produces the highest pricing possible. I would very much not like us to legislate in such a way that it is hard for new entrants to come in, that existing participants are able to consolidate
	their positions, and that one or two of them are able to push their prices up even higher. That would be deeply undesirable and would increase the amount of abuse.
	The concentration of power in a very small number of banks has reduced the competitiveness of the banking system in this country. If we had a more competitive banking system, we might find that the banks were more interested in making lower-level loans, but because they only need to concentrate on the biggest business, which is the easiest—the least risky—the major banks are not in this area. They leave it to the payday loan companies, which are less well organised; they are organised in a more aggressive way, and a relatively unattractive way compared with the major banks. They are dealing with people who have a lesser ability to protect themselves against the payday lending companies, and they are not so much a part of the full regulated system in the way that the banks are. My hon. Friend is spot-on to say that we should not make it our aim to be able to boast about how many payday lenders we are forcing out of business, because we want an active and competitive sector rather than just having one or two players left in the end.
	One aspect of the Bill that has been much praised—including by my hon. Friend, in a speech with which I otherwise agreed a great deal—is the power to enable high-cost credit providers to levy and provide a fund. That is exactly the sort of thing that Parliament should not allow. Moreover, it is in contravention of Magna Carta to allow such a power to be given to third parties. The power to levy fines and taxation belongs, in this country, under Magna Carta, only to courts, and that includes the High Court of Parliament.

Robin Walker: I was very interested when my hon. Friend mentioned some forms of regulation of the investment sector and the banks, and argued in favour of the extension of such regulation to the payday loans sector. Does he accept that at the moment, banks and credit unions are paying towards the cost of financial advice, but payday lenders are not? Does he not find that an extraordinary situation—admittedly, one that we inherited from the previous Government, and one that we should try to rectify?

Jacob Rees-Mogg: I completely agree with my hon. Friend that it is an anomaly, but not all anomalies are corrected by adding people in to the anomaly. It is much simpler to abolish the anomaly and say that the right to levy taxation is a fundamental right of Parliament. I quoted specifically from Magna Carta, which refers to a court, and we are the High Court of Parliament. It is important to remember that fines should only come through a proper judicial process or through the will of Parliament extracting fees. As soon as we delegate that to other bodies, over which there is no democratic control, we give up something that is fundamental to this House and what it is for. The consent to taxation is what this House has done since 1265. Perhaps the last Labour Government passed it over in a fit of absent-mindedness; they were not known for their love of the history of the constitution and their strictest adherence to it.

Philip Davies: Would a solution to this rare disagreement between my two hon. Friends be for payday loan companies to volunteer a certain amount of money to help with this issue, in the same way as bookmakers voluntarily give money to charities to help with problem gambling?

Jacob Rees-Mogg: I am grateful for that suggestion; I think it is a very useful one. I would be very happy to see a levy brought in under the Finance Bill. I have no objection to a levy being placed on these people; it is just who places it. It needs to be placed by Parliament because that is a hard, constitutional right and power, not by an independent regulator.

Mark Durkan: Would not the answer then be simply to say that any levy proposed by the regulator would be subject to a resolution of Parliament?

Jacob Rees-Mogg: The hon. Gentleman has found a brilliant middle way. I do not usually like third ways, because one is going down the middle of the road and is most likely to get run over, but on this occasion I am in cross-party agreement with him.
	To have the matter come before Parliament in such a way that Parliament can say no is infinitely preferable. I would also like it to be back-dated to cover the other levies. This House ought never to give up its powers accidentally because, in a sort of fit of absent-mindedness, we have passed the ability to tax to other independent, or nominally independent, bodies. That would be an error.
	I want to indicate firmly that I think this Bill is very good in its intention but not in its practice. That is true of a lot of Bills on Fridays, and that is why the Government so often oppose them. I absolutely accept that there is a problem and that payday loans are an unattractive part of the capitalist system, but this House must always be careful that the solution is not worse than the problem.
	As I said, the problem, in essence, is one that has existed from time immemorial. It is not a new problem that we have suddenly come up against, and unfortunately it is not one to which there has ever been a neat and easy solution. Caps have been tried again and again. A cap was the idea of the Council of Nicaea in the 350s AD, and it was repeated under Henry VIII in 1545. Those caps did not work and there is no reason to suppose that new caps will work. Why? Because people need to borrow the money when they need to borrow it, and therefore they will go out and find it one way or another. The more they are pushed into an unregulated and almost criminal arena, the worse it will be for them. It is therefore very important that this House does not rush to do something because it seems like a good idea when in reality it will not solve the problem and risks making it worse.
	This House ought never to legislate when solutions already exist on the statute book. We see this time and again. In both Division Lobbies, the Acts passed, going back to the last war, are listed in volumes of ever-increasing thickness. The problem is that these volumes have laws going into them that are reprinted, re-enacted and re-passed because nobody bothered to look back to see whether they were already on the statute book and whether there might be a better answer already there just waiting to be implemented if only people had the gumption to get on and do it.

Lyn Brown: I add my hearty congratulations and thanks to my hon. Friend the Member for Sheffield Central (Paul Blomfield) on his success in securing his private Member’s Bill, and for choosing this vital topic as its subject.
	I regret to say that many people in my constituency find themselves in a situation where they have to resort to payday loans and other short-term, very expensive borrowing. Of course, in my part of east London using short-term credit is nothing new. In years past, my family used the pawn shop, as did many others in their communities. It helped out when the week’s money would not go quite far enough to meet the week’s outgoings. However, payday loans are in a different, far more pernicious league, and people are in a very different and more difficult place, with precarious unemployment, falling wages, soaring house bills, the bedroom tax, the benefits cap and rising food bills, along with heating and power costs. It is an ugly and toxic web that brings anxiety and stress to households. It makes it much more difficult to have a stable and resilient family life, and it undermines the entire community.
	One of the factors in my constituency that is driving these difficulties is the proliferation of the zero-hours contract, which, in my view, takes us back to Victorian days and the days of my grandfather standing as lump labour on the dockside, hoping that he might earn enough money to feed his family. These contracts are extraordinarily exploitative and need to be regulated in the same vein as the providers of high-cost credit.
	After three months of working for a company and being told regularly that he was doing a really good job, one constituent—I will call him Otis—was told to buy more work shirts, only to be told that very same week not to come back the following Monday. He was given no reason, no explanation and no notice. It is for such reasons that people feel helpless and surrender to the advertised images of a friendly, carefree, kindly world in which all is well and money is plentiful and freely given.

Philip Davies: I agree with an awful lot of what the hon. Lady has said so far about the cost of living and how difficult families are finding it at the moment. Does she agree that one of the better solutions would be to try to find ways to reduce the cost of living so that they do not feel the need to go to payday lenders in the first place—perhaps, say, through abolishing the BBC licence fee or voting against the Energy Bill, as some Government Members did, which is putting up the price of energy unnecessarily?

Lyn Brown: I was with the hon. Gentleman for at least the first three quarters of that intervention.

Philip Davies: More than most!

Lyn Brown: It certainly is more than most. I do not think we will get accord even if I take more interventions from the hon. Gentleman.

Kevan Jones: Is it not the case that some of the things that the Government are doing, such as the bedroom tax, are driving people to take payday loans? If we followed through the proposals made by Beecroft,
	who is a major stakeholder in Wonga, there would be more zero-hour contracts and less protection at work for those individuals.

Lyn Brown: I agree with my hon. Friend’s analysis.
	Community Links is a valued and well-established charity in my constituency that has worked tirelessly on behalf of disadvantaged communities for more than two decades. Its clients include people who have taken out payday loans as a means of supporting regular family expenditure. Community Links tells me that over the last year or so it has seen a 20% increase in payday loan problems, which its advisers attribute to the ease of access and application. It has given me two examples to share with the House of real everyday problems faced by my constituents.
	The first client is a married woman with two school-aged children. The family own their property and are paying off the mortgage. She was in part-time employment, working as an administrative assistant, and her husband had been made redundant, so the family had to manage and struggle on her single wage. She started to take out payday loans in order to clear unexpected bills, but she then began to use the loans as a way of increasing family income.
	Although she was highly experienced at juggling the loans, one by one the loan companies started to contact her regarding repayment. When she went to Community Links for advice, she had four payday loans with four different companies—short-term loans with high interest. She had also been using her credit card to pay for family expenditure and the total debt was about £7,000. She tried to negotiate the payments herself, but the companies simply were not interested. She felt threatened by numerous telephone calls, sometimes many on one day, and visits to her home address. Although she is a very competent individual, she became swamped by the loan companies’ demands and sought legal advice as a result. Community Links advisers drafted a financial statement, negotiated with creditors and arranged reasonable payment terms. It also arranged for her mortgage payments to be reduced in order to bring down her expenditure to match her income. The Bill’s proposals on affordability and access should help prevent the build-up of such calamitous debts. If she had not gone to Community Links, or if it had not had the staff to help her, I shudder to think what would have happened to her and her family. It would have meant default on the mortgage and homelessness. She would then have had no choice but to apply for housing benefit and would have had found herself, as is often the case in London, in substandard, expensive private rented accommodation. All this would have been at a cost to the taxpayer and would have been avoidable with the proper regulation of loan companies.
	I am afraid that this case also highlights the crucial role of debt advice in starting to resolve people’s problems. Community Links tells me that it has lost all legal aid funding for welfare benefits and debt advice as a result of Government cuts, amounting to more than 700 cases a year, each of which would be more likely to lead to ongoing costs for the taxpayer, rather than individual, one-off payments and interventions.
	Community Links also tells me that the loss of funding for advice services means that struggling families are finding it much harder to access support when they
	need it and are getting deeper into crisis. The solutions—eviction and homelessness—cost the taxpayer money and we must not forget that.
	I welcome the Bill’s provision that lenders should signpost customers to free, impartial advice when they are turned down or miss a payment. I also welcome the potential levy on lenders, specifically to pay for additional debt advice through the Money Advice Service. I hope that the Financial Conduct Authority takes note of that when it assumes responsibility for the sector in April 2014.

Robin Walker: I agree with the hon. Lady about the importance of free financial advice—she gave a good example of that from her constituency—but would she not agree that, potentially, this should be extended beyond the Money Advice Service to other voluntary bodies that provide free financial advice and do so much for our constituents?

Lyn Brown: I absolutely agree. Community Links is not a money advice service, per se; it is a general advice service, and a good one at that.
	The second case that Community Links told me about also illustrates why the Bill is needed. The case is that of a single woman with three dependent school-age children—nine, 12 and 16—living in council accommodation. She lives with slight learning difficulties and experiences problems with literacy. She currently has a part-time job, receiving a salary of £557 a month, with working tax credits of £240, plus child tax credit and child benefit. When she visited Community Links, she reported council rent arrears and difficulty meeting regular utility bills, and was finding it difficult to live on her income. She also began to use easily available payday loans to supplement her income.
	At the time of her initial visit, the total value of the loans was £977, which was renewed—rolled over—each month, to supplement her income. She also had unsecured credit of £14,000. Payday loans were used for regular living expenses; for example, child minding, school meals, household bills and travel to work. The client did not fully understand the long-term implications of interest payments at all, or of using payday loans for family expenditure. There was simply no understanding. Community Links is currently assisting this woman by applying for a debt relief order. The proposal in the Bill to determine and regularly review the number of roll-overs and a limit on the number of loans per year would help people such as this woman.
	It is certainly no help to allow—indeed, to encourage, through attractive advertising and inadequate regulation—almost unrestricted access to expensive credit, when advice and support to manage debt is so much more appropriate. An existing alternative has already been spoken about in this Chamber: the credit union movement. I have direct experience, from my time working in Waltham Forest, of establishing a credit union. I am delighted that Justin Welby, the Archbishop of Canterbury, has called on church parishioners to lend a hand to credit unions, so that they can provide an alternative to payday loans. The Waltham Forest community credit union was ahead of its time, because it was set up by confederation of churches in the borough. With the skills, financial experience and premises and halls at the
	heart of communities that it offers, the Church is exceptionally well placed to help the credit union sector to grow and thrive.
	Credit unions often have difficulty in establishing themselves because they do not have the basic seed funding that they need to grow to the level at which the membership of the union makes it sustainable. It would be good if my hon. Friend the Member for Sheffield Central could find a way in which the Bill could be amended to nurture credit unions so that they become an alternative to the payday loans system. There would be a just logic in imposing a levy on payday lenders to support the development of credit unions, because the problem would be funding the solution.
	I commend the principles and provisions of the Bill. It would make the market fairer by regulating the advertising of payday loan providers, requiring clear information on the cost of loans and introducing a range of measures to protect borrowers in difficulty. In particular, I commend the Bill because it would give the FCA the ability to prohibit
	“specific features of high-cost credit”,
	including the amount of credit that can be advanced, the level of default charges, charges related to the use of a continuous payment authority, roll-over and repeat lending, and obligations on loan guarantees.
	Those are the issues that are most often brought to me by the advice services in my area and I am sure that they are the types of problems that hon. Members on both sides of the House encounter at their surgeries. Those issues are at the heart of the irresponsible lending and repeated rolling over of unpaid loans that cause so much harm and misery to borrowers and families. The provisions of the Bill are greatly needed. They would help people in our communities who are vulnerable to exploitation, and who need and deserve our support.

Barbara Keeley: I am pleased that there is a little time left for me to speak. I pay tribute to my hon. Friend the Member for Sheffield Central (Paul Blomfield) for introducing a Bill that addresses a number of serious issues in respect of payday loans. It is clear from today’s debate that such loans are of concern to many hon. Members.
	The Bill is important because, as my hon. Friend the Member for Glasgow North (Ann McKechin) said, we have a weak regulatory system for high-cost credit. Citizens Advice tells us that self-regulation of the payday loans sector has not worked. Since the introduction of the industry’s good practice customer charter in November 2012, Citizens Advice has run a survey to help people who have payday loans check whether their lender is sticking to the charter. The results show that the charter is not being met to a surprising degree. Payday lenders are failing to treat people fairly and are breaking 12 of the 14 promises laid out in the charter.
	The Citizens Advice survey also shows that lenders are not making adequate affordability checks. I am glad that that problem has been referred to repeatedly in this debate. There are many examples of customers who get into financial difficulty not getting the help that they need. Some even find that the lenders, rather than helping them, are positively obstructive to their attempts to pay off their debts.
	My hon. Friend the Member for North Durham (Mr Jones) talked about the millions of pounds that are being made in the payday loans market. That market is growing very quickly. In 2008-09, it was worth an estimated £900 million. Last year, it was worth between £2 billion and £2.2 billion. That big increase is a sign of the growing hardship in our communities.
	I welcome the measures in the Bill to deal with the serious pitfalls that are experienced by large numbers of borrowers, which we have heard about today. It would deal with opaque interest charges, the use of continuous payment authorities to collect repayments regardless of the borrower’s financial circumstances and the key issue of advertising, which we have talked about. Young and vulnerable people are bombarded with a saturation level of adverts and texts promoting payday loans.

Lyn Brown: I was going to say more in my speech, but I wanted to keep it short so that my hon. Friend and others could get in before the end of the debate. I was going to speak about those pernicious television adverts with the little old puppets who wander around. They just look so cosy. In fact, one of the young people who came to see me because they had difficulty with payday loans did not go to Wonga because it was for old people. Does my hon. Friend agree that the advertising targets vulnerable groups in our constituencies?

Barbara Keeley: It does target such groups, and those cartoon characters are pernicious, as is the use of celebrities, some of whom should be ashamed of endorsing such products and bringing misery into people’s lives.
	The Bill provides that the Financial Conduct Authority shall have power to introduce an additional levy on lenders to fund a debt advice service, which is good. We have heard repeatedly in this debate about the misery that payday lenders are causing people, and it is right that they should fund debt advice services. Such services should be an integral part of the lending process, but that need is too often ignored. Given the profits and growth in the market that I outlined, it is only right for the high-cost credit sector to help with a levy to pay for debt advice services.
	Citizens advice bureaux up and down the country are struggling with cuts to their grants from local authorities. I felt the need to enter a 10 km race, which I ran on behalf of my local citizens advice bureau. It was not the sort of help that Front-Bench colleagues can sometimes raise, but I thought it important for those at my local citizens advice bureau to understand that I was prepared to do something to help with funding. The funding of advice services is crucial.
	I have three broad concerns about the way the payday loans industry works. The first, which we have heard much about, is the issuing of multiple loans, which is one of the biggest causes of defaulting on the repayment of a loan. Many examples have been provided by the StepChange debt charity, which reminds us that findings by the Office of Fair Trading highlighted widespread irresponsible lending. In particular, the scale of repayment problems shows us that such lending is not confined to a small group of rogue lenders.
	In 2011-12, about 2.7 million loans—one third of the total—could not be repaid on time, or at all. That is serious, and plainly highlights the issue of affordability. Nearly two thirds of those seeking help with their debt from StepChange have more than one loan, and nearly one third have four or more. In Salford, a person who works at a college on the minimum wage told Salfordonline, a local community website, that she had taken out loans to pay both her rent and council tax—an example of using loans for everyday living costs similar to that presented by my hon. Friend the Member for West Ham (Lyn Brown).
	That person said:
	“I have poor credit so I went to Wonga, then I got into a mess with interest so I got other loans. At first it was £150, then £300, then I just started paying the interest. Then I got other loans to cover my living expenses, it was out of control and I was missing payments.”
	She was finally forced to call in a debt management company, but that, too, was “for a fee”, making her problems worse.
	A request for more than one loan should ring alarm bells about the applicant’s financial circumstances and their ability to pay, but no alarm bells appear to be in place in the officers of these lenders. We need tighter controls to ensure that requests for more than one loan trigger comprehensive debt advice, and a repayment plan with a proper assessment of a person’s ability to pay.
	We have heard much in this debate—quite rightly—about the volume of roll-over loans where loans are renewed at the end of an initial loan’s repayment period. That business is increasing, and few mechanisms are in place to assess properly the ability of borrowers to repay.
	The Office of Fair Trading states that three quarters of payday lenders—a substantial part of the market—are renewing loans without checking whether they will be affordable, even though a roll-over is a clear warning sign that a borrower might be experiencing financial difficulties. The OFT notes that payday lenders have a strong incentive to roll over loans as they make half their revenues that way. I welcome the provisions in the Bill that empower the Financial Conduct Authority to set limits on charges, including interest, and to restrict the ability of lenders to make multiple and roll-over loans.
	StepChange tells us that since 2011 the average amount owed in payday loans has increased substantially by £400 to £1,665. On average, people now owe more than a month’s income in payday loans. Average monthly income is now £1,298, and the average owed in payday loans is £1,665. That is a key measure of lack of affordability. Sadly, in my constituency the average owed on payday loans is £1,673, which is even higher than the national average.
	As my hon. Friend the Member for Sheffield Central detailed earlier, there is serious concern about how the industry uses and misuses the continuous payment authority. Many hon. Members will have heard about constituents —we have heard some examples today—who are trapped in a cycle of debt that is made worse when the lender uses the continuous payment authority to take money out of their accounts, regardless of the impact on the borrower. As we have heard, money is often withdrawn by the lender with no consideration for the borrower’s essential living costs. Indeed, an example given today by
	Salford’s citizens advice bureau is of a borrower who fears he will lose his home and his job because payday lenders have left him with only £1.17 a week from his weekly wage. He does not have enough money to travel to work, let alone pay for his other living costs.

Lyn Brown: One of the things that has come up in my surgeries time and time again is how telephone calls and letters from lenders imply to borrowers that their debt to a payday loan company is a priority debt. There is no explanation that the real priority is to keep a roof over one’s head: paying the mortgage or the rent, and the council tax. Does my hon. Friend have similar examples?

Barbara Keeley: Indeed. One difficulty is that the banks are not straightforward enough with their customers. I strongly support greater controls over the use of the continuous payment authority. People have to be allowed, however much or little income they have, to plan their own finances.
	We know from all these examples, and the example cited by my hon. Friend, that not enough borrowers know that they have the right to ask their bank to cancel the continuous payment authority. The Bill gives the FCA the power to require lenders to provide information about the right to cancel from the outset of the loan. This would give people who took out payday loans additional peace of mind that if they got in a mess and things were not working out they could cancel it.
	The third area of concern, returning to the point made by my hon. Friend, is the persistent and excessive advertising of payday loans. Citizens Advice tells us that advertising for payday loans has reached saturation point. The adverts are unclear on costs and the potential impact of failure to repay a loan. Also worrying is the use of celebrities and cartoon characters in adverts. How are we targeting a market of responsible borrowing and lending by using cartoon characters? Clearly, young families and vulnerable people are being targeted with blanket advertising on daytime television. It is when I exercise in the gym that I am confronted by this constant advertising, and I find myself wanting to turn away because I get so sick of seeing it. One 32-year-old worker told Salfordonline that he had used Wonga to take out eight short-term loans in one year. He said:
	“I was working but needed a little extra cash to help out at home”.
	He had used overdrafts and credit cards before but:
	“The most recent loan of £200 was taken out over four weeks, with £260 to pay back. I was tempted because it’s so easy to borrow and all the adverts on TV don’t help. The fact that there are no credit checks helps a lot of people into bad financial situations.”
	Citizens Advice feels that broadcast advertising for payday loans should be limited to after the 9 o’clock watershed, and should be prohibited from any programme likely to appeal to anyone under the age of 18. It also feels that the measures in the Bill are needed to stop marketing via text messages. The 32-year-old from Salford whom I just quoted highlighted the fact that payday lenders would hold on to his details for six years, and that he was expecting to be bombarded with e-mails and texts offering him more loans. He commented:
	“I won’t be using”—
	payday loans—
	“again, but I wish I could just close down the account so there is no temptation. Once they get their teeth into you they never let you go.”
	This morning, Paul Lewis’s money website raised the issue of payday lender QuickQuid, which yesterday sent lots of e-mails to people on its database. They might have been QuickQuid customers who had already paid off their loan, but they seemed to include people who had never paid it back. We have discussed the point about bailiffs; these threatening e-mails warned that action would be taken if the customers did not pay back the debt and that debt collectors would be sent in. It caused great alarm.
	Research for Which? found that seven out of 10 payday loan users regretted taking out credit and that half had taken out credit they could not repay. Citizens Advice believes that the Bill would be a key step towards protecting people from some of the worst practices of payday lenders and help better to protect borrowers struggling to repay debts. I pay tribute to the citizens advice bureau in Salford, which gives great help and advice, and to citizens advice groups across the country. I am sure hon. Members might like to pay tribute to their own CABs.

Lyn Brown: I absolutely agree with my hon. Friend. Currently, we have no CAB in Newham, and funding for advice groups is drying up. It has become impossible for people to get the financial advice and assistance they desperately need.

Barbara Keeley: I went on a 10 km run to help my CAB; it was under threat, but we managed to preserve this essential service in my locality. Salford city council offered it accommodation, and it now runs an excellent service from a local council building. That has really helped.

George Howarth: I would like to pay tribute to the CABs and other advice bureaux in Knowsley, which are the last defence for many people seeking advice on what to do when they get into debt as a result of payday loans. It is also important to highlight the significant contribution of credit unions. In Knowsley, they provide not only a lending and deposit service, but a link to banks and credit from the Co-op so that people can buy white goods, for example.

Barbara Keeley: That is an excellent example. We heard earlier about a project run with the backing of Unite—that seemed to cause some amusement among Government Members—in Salford to get a credit union off the ground. We have credit unions serving parts, but not the whole of Salford, which has some very deprived wards, where the whole gamut of loan sharks have been plying their trade. I am concerned that we protect people from the bailiffs and the financial truncheons—I think that is what someone called them earlier—and help them join together in co-operatives.

George Howarth: This point has been made repeatedly, but it bears repeating: with multiple loans, roll-overs and all of that, people are eventually driven into the hands of loan sharks, with all the woeful consequences that can have.

Barbara Keeley: Absolutely.
	I applaud my hon. Friend the Member for Sheffield Central for introducing the Bill, which could do much to regulate the industry and provide greater safeguards for those who need them most. My hon. Friend the Member for North Durham talked about the millions up and down the country in such dreadful situations. There is nothing more worrying than the oppressive feeling of being in debt, yet being unable to pay it back, so this Bill is vital.

Paul Blomfield: Would my hon. Friend like to comment on the important proposals made earlier by our hon. Friend the Member for Harrow West (Mr Thomas) about developing alternative products and the role of credit unions in that process?

Barbara Keeley: Indeed, and I hope that as we move forward with the Bill—

Christopher Chope: Will the hon. Lady give way?

Barbara Keeley: I will not.
	I hope that the Bill can move into Committee and that there will be an opportunity to discuss ways of improving it. It is vital to the millions of people it would help. We need to—
	The debate stood adjourned (Standing Order No. 11(2)).
	Ordered, That the debate be resumed on Friday 6 September.

Business without Debate
	 — 
	CHILD MALTREATMENT BILL

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.
	Bill to be read a Second time on Friday 22 November.

EDUCATION (INFORMATION SHARING) BILL

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.
	Bill to be read a Second time on Friday 13 September.

SEXUAL IMPROPRIETY IN EMPLOYMENT BILL

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.
	Bill to be read a Second time on Friday 13 September.

HOUSE OF LORDS (MAXIMUM MEMBERSHIP) BILL

Dawn Primarolo: This Bill cannot proceed without Queen’s consent.
	Bill to be read a Second time on Friday 13 September.

EU MEMBERSHIP (AUDIT OF COSTS AND BENEFITS) BILL

Motion made, That the Bill be now read a Second time.

Hon. Members: Object.
	Bill to be read a Second time on Friday 13 September.

SUPPORT FOR PRISONERS’ FAMILIES

Motion made, and Question proposed, That this House do now adjourn.—(Greg Hands.)

Mel Stride: It is a great pleasure to have the opportunity to raise the important issue of prisoners’ families. I thank my hon. Friend the prisons Minister for agreeing to answer on behalf of the Government and for his help and the time he has given me on this issue over a long period, including meeting my constituent, Mary Stephenson, and the String of Pearls project some weeks ago.
	There are around 3.7 million recorded crimes in this country every year. For each of those crimes there is at least one direct victim, and in many cases many direct victims. However, that should not mean that we overlook what many refer to as the hidden victims: prisoners’ families. Approximately 160,000 children in this country currently have one or both parents inside prison. That is approximately twice the number of children in care and more than the number who suffer as a consequence of the divorce of their parents in any one year. Those children are three times as likely to suffer from mental health problems as other children in society. More than 60% of young boys who have one parent incarcerated are likely to go on to offend and go into prison later in their lives as a consequence.
	Families on the outside often suffer the social stigma of the communities in which they live. It is often assumed that families have brought these problems on themselves. Children at school might suffer bullying and many of these families might find more solace in the local criminal fraternity than they do among their neighbours and the communities in which they live. Many families suffer emotional problems, stresses and financial problems, particularly where the individual in prison has previously been the breadwinner. Families also suffer problems in visiting their loved ones in prisons, especially when many of the prisons are a long way from home. The Minister may be able to provide some more recent information in a few moments, but I know that in 2003 some 11,000 prisoners were incarcerated at a distance greater than 100 miles from where their family lived.

Guy Opperman: I draw the House’s attention to my book, which covers some of the issues on this subject, and I congratulate my hon. Friend on securing the debate. Does he recall that in 2007 a large number of charities, led by the Prison Reform Trust, reported to the inter-ministerial group on reducing reoffending, and that the findings were that
	“prisoners who received visits from their family were twice as likely to gain employment on release and three times as likely to have accommodation arranged as those who did not receive any visits”?
	Is not the heart of the point that it underlines the lack of reoffending, which is what we also seek?

Mel Stride: I thank my hon. Friend for his intervention and congratulate him on the deep and detailed research he carried out for the production of his book. I very much take his point: it is essential that families are connected to prisoners for, among other reasons, the reason he has just elaborated. It is not just the ability of
	families to connect with their loved ones in prisons that matters, as the quality of the experience when they do is also important, as I shall explain in a few moments.
	The issue is not just about the suffering of families, because it is the value of the families in the rehabilitation process that really matters. It is a fact that where a prisoner comes out of prison into a family environment—gaining the support identified by my hon. Friend the Member for Hexham (Guy Opperman)—they are 40% less likely to reoffend than if there were no family there to support them. The economic costs to our criminal justice system of reoffending are, of course, absolutely immense, running in excess of £10 billion a year. The beneficial effects are felt not only by those being released but by their children, and we can see demonstrable reductions in inter-generational crime resulting from the presence of families and their support for prisoners on release.
	The support from families comes while the prisoners are inside prison, and I think one of the most important aspects of prison visits and connections between families and prisoners is that they are there to remind those inside what is happening outside so that when prisoners leave they will have very real personal responsibilities and it will be for them to tackle them. It is also known that where family visits and contacts with prisoners are facilitated, the likelihood of self-harming among prisoners is reduced, as indeed is the likelihood of suicide.
	Outside prison, family contact helps, as my hon. Friend indicated, in the provision of jobs and appropriate housing. It also leads to what some describe as prisoners having “a stake in conformity”, meaning that they have social pressure from the family network to ensure that they do not reoffend, that they go straight and avoid lapsing back into drug use or the misuse of alcohol.
	I am very heartened by the direction of travel that Ministers have mapped out for us on the criminal justice side. I believe that payment by results, when it comes to involving voluntary or private organisations, is a good way to help ensure rehabilitation, leading to an unleashing of innovation, of entrepreneurial spirit, of creativity and to solutions being suggested that are appropriate to local circumstances. I also believe it is important that the Government have announced 70 resettlement prisons. Prisoners in the final three months of their sentence will be closer to their families than would otherwise be the case, with all the benefits I have identified.
	As a general point, it is extremely important that we ensure that the level of contact I am describing exists throughout the criminal justice process, from as close as possible to the point of arrest and charge and certainly right the way through to prison and post-release. The nature of that contact should be weighted towards mentoring for families by individuals who have gone through the difficulties associated with having a loved one in prison and who can therefore share their experience, compassion and insight.
	I have a series of points and questions for the Minister, on which I ask for his comments. The first question is how he and his colleagues see the Government encouraging organisations that are involved in the rehabilitation process, particularly the smaller and perhaps more innovative ones. I think particularly of String of Pearls, the project that Mary Stephenson and her colleagues have been operating in HMP Channings Wood. We
	need to ensure that such projects are not crowded out by the likes of G4S and Serco, about which we have heard less than flattering news recently.

Guy Opperman: I pay tribute to the organisations that my hon. Friend cites in support of his argument. Does he agree that there is potential in the years to come for one of those organisations, or a group of them together, to take over a resettlement prison, so that instead of having a state-run or privately run prison, we have a community or charity-run prison that will work for the benefit of the community?

Mel Stride: I thank my hon. Friend for that interesting idea. That is the exciting part of the Government’s direction of travel—all sorts of innovation, partnership arrangements and possibilities may occur in the future, because we are not being too prescriptive from the centre. We are allowing best practice to thrive in a pluralistic market, allowing competition to drive up standards and so on.
	Might the Minister consider additional funding for some small providers, such as String of Pearls, so that they are not crowded out by the bigger players and so that, further down the line, we can have a more pluralistic marketplace of providers and encourage the innovation and nimble-footedness that we associate with smaller organisations in particular?
	I also ask the Minister how we can ensure that prisoners’ families are a major focus of rehabilitation organisations. I wonder whether the fee mechanism might be a way of achieving that. I know that there are three strands to the way in which providers will be paid. There is payment by results, but there is also the fee-for-service strand, which I understand is for providers meeting certain set criteria. I wonder whether we may have a sharp focus in those criteria on the involvement of families, so that organisations that are strong in that respect are rewarded for it. As I understand it, the third strand of the payment structure will be penalties for failure. I would like providers who ignore the importance of families to be penalised in some form.
	The other thought I would like to share with the Minister is that the justice data lab, which we have set up to allow rehabilitation providers to benchmark their performance against other providers and against the norm, is also there to share best practice. I would like to see a strong focus on family involvement as an element of best practice in that data lab.
	I wish to ask the Minister about prison visits. As I suggested, I think they are extremely important, and my hon. Friend the Member for Hexham shares that view. How can we increase the frequency of visits? At present only about 50% of prisoners receive their full statutory entitlement of visits, and I would like us to consider how we might increase that.

Guy Opperman: The evidence overwhelmingly supports my hon. Friend’s argument that prisons are at their most peaceful shortly before visits. That is because the anticipation of those visits serves to calm the whole prison down.

Mel Stride: I thank my hon. Friend for that important observation, and it is therefore important that visits are conducted in the most positive spirit possible. Frequently there are rub-downs or strip searches, but those subjected to such actions often feel a deep sense of shame. I accept that they are necessary in certain circumstances, but I would like us to consider minimising them in future.
	Drug misuse and drugs coming into prisons is a serious problem that we need to tackle, but I do not want us to put up glass partitions between visitors and prisoners unless it is absolutely essential, as that dehumanises the whole experience, and reduces the benefits that may flow from this kind of contact.
	Where it is difficult for families to visit prisoners, perhaps because of the distances involved, phone contact is often the only contact that is available. Much of that contact is on a telephone in a prison corridor under warder supervision. I do not think that is the best, or most appropriate, environment. I would like prisoners to have phones in cells. By that I do not mean we should go soft on prisoners by allowing them to phone whoever they want, but they should be allowed some element of privacy when they are making the call. I know there has been a move towards that in private prisons, on the basis that it is cheaper because there is less warder involvement.
	I look forward to hearing the Minister’s response and I thank him again for all the support he has given me, not least in responding to the numerous questions I have had for him, and for the support he has given Mary Stephenson and the String of Pearls project and the interest he has shown in that. I am deeply grateful for that, and I hope that in some small and modest way this debate may help to push families a little closer to the heart of the criminal justice system, just as we as a party believe families should be at the heart of strong and decent societies.

Jeremy Wright: May I first congratulate my hon. Friend the Member for Central Devon (Mel Stride) on securing this debate, and also return the compliment to him by thanking him for the considerable interest he takes in this subject? He has highlighted one of several important issues covered by the Government’s plans to transform the criminal justice system. He is right to say that we must consider such matters in the context of falling crime figures, which is good news, but reoffending remains a serious challenge, and the ways to achieve further reductions in crime and reoffending include taking bold and effective steps to rehabilitate offenders by assisting, encouraging and guiding them away from crime into new, worthwhile and productive ways of life. The evidence shows that support for prisoners’ families is an important part of that, for two reasons. First, supporting offenders’ family relationships can help to reduce reoffending. Secondly, supporting offenders’ families can help to reduce the likelihood of intergenerational offending. Both those things are important.
	As my hon. Friend pointed out, we announced on 4 July that a total of 70 resettlement prisons have been identified for the adult male prisoner estate, with more to be identified for the female and young adult estates.
	Resettlement prisons are one strand of a comprehensive strategy of reform that is seeking to tackle the problem of reoffending in all its aspects. That should provide both better opportunities to support contact with families, and links with local partners and providers of support services. Providers will offer a resettlement service for all offenders in custody before their release, which may well include family support, where it is needed.
	I agree with my hon. Friend that positive family relationships can be an important protective factor in helping offenders desist from future offending. We understand that we can help to break the cycle of offending by working to strengthen family ties, to improve family and other relationships, to improve parenting behaviour and to increase acceptance into communities and social networks. He was right—my hon. Friend the Member for Hexham (Guy Opperman) made this point, too—to say that research has shown that ensuring a prisoner keeps in contact with his or her family while in prison can help in reducing the likelihood of reoffending. We know, too, that most prisoners regard their families as important to them and want them to be involved in their lives, and that they believe that support from their family and seeing their children would be important in stopping them reoffending in the future. It is therefore important that we support and allow contact, and the involvement of families in prisoners’ sentences.
	My hon. Friend the Member for Central Devon asked, in particular, about phone contact. He will know that there are private prisons that currently allow phone use in cells. Rochester prison, in the publicly run estate, is also trialling the use of phones in cells. It is important that we look at what the evidence is showing us about that. He makes a fair point that if a prisoner is to be encouraged to make more phone calls home and to speak to the children more often, they are more likely to do that if the phone is located in the cell than if it is located on the landing. However, he will recognise that we cannot allow unrestricted access to telephones, and whatever we do there will still be a restricted list of numbers that prisoners are able to call.

Guy Opperman: We all know that at least 8,000 mobile phones are confiscated by the Prison Service every year, so by supposition another 8,000 that are not confiscated are probably in the system. It must be accepted that mobile phones are already in the system. Due deference must be paid to security, but does the Minister accept the broad principle that a greater degree of communication, whether by phone, e-mail or computer, in whatever shape or form, must be the way ahead if we are to have this family relationship encouraged, as we would like?

Jeremy Wright: My hon. Friend rightly says that, sadly, mobile phones find their way into prison, but that is an offence and we do not tolerate it. It cannot be wise to allow for unrestricted access to communications, be that telephone contact or e-mail contact. What is sensible is that we consider ways in which, within the restrictions of a limited amount of approved phone numbers or approved contacts that a prisoner can have, we look at the best way of ensuring that that contact can happen, for the reasons we have been discussing.
	This debate is also important because of the effect that parental imprisonment has on children. It is estimated that in any given year approximately 200,000 children
	are affected by a parent being in or going to prison. Most children who experience parental imprisonment are likely to experience it more than once. My hon. Friend the Member for Central Devon referred to the figures, and we know that children with parents in prison are more vulnerable than other children. They are more likely to become offenders themselves and to develop behavioural problems and poor psychological health than children who have not had a parent in prison, and they may lose contact with their imprisoned mother or father. So we do understand that by supporting offenders’ families and children we can help to reduce the likelihood of intergenerational crime.
	We take that responsibility within the Prison Service very seriously. Prison Service instructions on rehabilitation services outline expectations on prisons to: help staff in recognising the impact of imprisonment on prisoners’ families and to understand their role in the maintenance of family relationships and supporting offenders’ families; to provide advice, support, signposting and to refer prisoners to services; and to reflect the involvement of families in the offender management process.
	Prison rules require prisons to encourage prisoners to maintain outside contacts and meaningful family ties. Prison governors have duties under the Children Act 2004, many of which are associated with either the child’s right to contact with parents who are held in custody or the safeguarding and well-being of children with whom they have contact. There are also minimum standards relating to how prisons support family visitors, including having visiting times that maximise opportunities for prisoners and families to meet and ensuring opportunities for reasonable physical contact. That goes to the point my hon. Friend made about the presence of glass screens and the like. He will appreciate that there is always a balance to be struck between the security of the prison and ensuring that contraband cannot be passed, and the need to ensure that relationships with family members are maintained with as much normality as can be managed in a custodial environment.
	My hon. Friend was right to make the point early on in his remarks that in many ways the families of prisoners are victims of what that prisoner has done, too. In many ways, the prisoner’s family also undergoes a sentence. There is a period of separation that cannot be helpful to domestic life and that certainly is not helpful to the relationship a prisoner might have with his or her children. When we can maintain physical contact and where it is compatible with security to do so, my hon. Friend is right that we should seek to do that. We can take practical measures too, such as providing facilities for children to play while visiting and providing decent, indoor facilities with toilets and baby changing facilities. The National Offender Management Service also encourages additional activities such as enhanced children’s play facilities, family support worker services, family days, child-centred visits and the like.
	My hon. Friend asked about what will happen in the future. As he knows, by opening up probation to a wider range of providers, we can bring additional skills and ideas into play, while the national probation service will continue to have a key role in managing risk, including the direct management of higher-risk offenders.
	My hon. Friend also asked about smaller organisations and I understand his concern. We, too, are concerned that we should ensure that those smaller organisations,
	particularly those in the voluntary sector, can play their full part in the new landscape. We need to do that in a number of ways. Let me give him two of the most important. We must ensure that in the bid assessment process we take full account of what the sustainability is likely to be of the relationships between larger and smaller organisations. We anticipate that many of the bids we will receive will come from a group of organisations, some large, some small. It is important that the smaller organisations are looked after in those arrangements and we will assess bids with that in mind. We will also need to ensure that over the duration of the contract period we have robust processes of contract management in place to ensure that the sustainable relationship between larger and smaller organisations is maintained.

Guy Opperman: Does the Minister accept that there is a genuine problem with the bid assessment process in that the smaller providers—charities, community groups—are effectively being frozen out of the process? We need to be very certain that there is a flexible system rather than a one-size-fits-all system to accommodate those small providers.

Jeremy Wright: I can understand my hon. Friend’s concern, but I think that many of the small organisations about which he, I and my hon. Friend the Member for Central Devon are concerned will be involved in the bid process. The trick is to ensure that they are still involved on a sustainable basis throughout the period of the contract. I can see the attraction of those smaller organisations and we are all familiar with excellent voluntary sector organisations that offer something special
	in a particular aspect of rehabilitation. I am confident that they will be involved; we must ensure that they stay involved and that they can remain in a sustainable relationship as time goes on.
	My hon. Friend the Member for Central Devon asked about funding. He will understand that the central premise of the system we are looking to establish is that what works should receive support. I think, as he does, that the evidence is good that involvement with families demonstrates effectiveness and I am confident that providers of rehabilitation services will look to provide that. Similarly, on his point about the justice data lab, it is important that we consider ways in which we can display information about what works in the most effective way, and I will consider his specific point about that.
	My hon. Friend will understand that the delivery of services to the children and families of offenders must be considered in the context of the Government’s wider approach to supporting families. Tackling troubled families is a priority for this Government and supporting offenders’ families is an important aspect of that work. That involves a partnership approach, which is embedded elsewhere with other Departments and is part of a legacy of earlier cross-government work.
	No one imagines that changing entrenched patterns of reoffending is a simple matter, but the Government firmly believe that the measures we are putting in place will help to achieve a fundamental transformation. Supporting offenders’ families has an important part to play in that.
	Question put and agreed to.
	House adjourned.